The following is a conversation with Nick Carter, who is a partner at Castle Island Ventures,
co-founder of CoinMetrics.io, and previously a crypto asset research analyst at Fidelity
Investments. He's a prominent writer, speaker, and podcaster on topics around decentralized finance
and especially Bitcoin. Quick mention of our sponsors, The Information, Athletic Greens,
ForSigmatic, and Blinkist. Check them out in the description to support this podcast.
This conversation with Nick Carter is part of a series of episodes on cryptocurrency
that is a small journey of exploration I'm on because I find decentralized finance
and especially Bitcoin fascinating, technically and philosophically, especially because it may
be the very mechanism that achieves a global decentralization of power, giving more sovereignty
to the individual and making our systems more resilient to corruption, manipulation, and in
general to the darker size of human nature. Please let me also address something for a few minutes
that happened recently that's been weighing heavy on me. If you find me annoying to listen to,
please skip to the actual conversation with Nick. I had a recent podcast episode with Anthony
Pompliano where we spoke about Bitcoin and life in general for three hours. I was curious, inspired,
positive, or at least I tried to be as I usually do. Someone clipped out out of context a short
segment of me mumbling something about having a PhD and I started getting mocked online because that
made it convenient for people to mock me for being yet another quote unquote expert who learns about
Bitcoin and thinks he knows everything. I almost never mentioned that I have a PhD except to make
fun of myself as I was doing or at least trying to do in the full context of that conversation.
I brought up grad school as a random example of one of the many journeys I've taken that was hard
but where the destination was in itself not very useful. I was saying I enjoy exploring with a
curious mind and I'm willing to be patient to learn to listen to humble myself with knowledge
for the sake of knowledge itself. Grad school was an example of that. The PhD means nothing,
at least to me. I never call myself an expert or at least try not to because that would be dumb
because I know how little I know. I'm not an influencer or a thought leader or whatever else
silly self-aggrandizing label people put on their LinkedIn. I try to be the opposite of what I was
mocked for. I try to think deeply about the world to look for the beautiful ideas in the minds of
others and to be inspired by them. I wanted to say all this because psychologically it struck
a bit of a blow. It made me realize that even when I approached things with love I may be mocked,
I may be derided, I may be taken out of context or even lied about. With a growing platform this
is sadly only increasing. I now have learned that there's people who are waiting for my missteps
so they can point the finger laugh and say see I told you so that guy's a joke he's a fraud.
As a fellow human being the knowledge of this is painful. Yes I know people tell me to toughen up
and my life has been about strengthening my mind in the face of my limits but I refuse to not be
fragile and wear my heart on my sleeve. It's who I am. In some sense this is the immune system of
the internet but let us be careful not to destroy the good ones in the process. The Bitcoin community
had to endure many years of attacks from quote-unquote experts and also fraudulent cryptocurrency
efforts that scam people out of their money. This created a powerful immune system that
fought the attackers and the scammers. I understand this and I also understand that
one of the beautiful aspects of Bitcoin is its community of humans is decentralized.
But some small part of this community has come to enjoy the us versus them battles
sometimes for the sake of the battle in itself. This happens in political discourse as well.
I understand this but to my limited mind it sounds like groupthink which has powerful defense
mechanisms against bad ideas but has dangerous consequences if taken too far as in many periods
of human history that I often talk about where the us versus them thinking has led to the suffering
of many. Again I understand the value of this as many bitcoins explain to me but it's not the way
I as a sovereign individual choose to walk in this life. By the way none of this podcast should be
treated as financial advice. Before Nick kindly gifted me with $100 worth of Bitcoin in hardware
form I didn't own any. I'll probably buy some Bitcoin on Cash App Coinbase and other platforms
and also transfer to a hardware wallet just to learn how to do it but other than that I don't
necessarily make wise investment decisions. Money is not a motivation for me personally. I try to
avoid it actually. I'm grateful for every day I'm alive no matter how much money is in my bank
account. For long stretches of my life that number was very close to zero and I was always
fortunate to be free and happy. So I encourage you to listen to people much smarter than me
for actual good financial advice. Here I'm just exploring ideas and as if this has not already
gone on too long let me please make another comment on the style of discourse among some
Bitcoin maximalists on platforms like Twitter that in my humble view I may be wrong but I believe
is not conducive to the nuanced empathetic exchange of ideas I very much look for and enjoy.
Again I appreciate their style of discourse. I think I understand the value of it but it's not
my thing so I don't want to engage in it. I want to hear the quiet voices in the room.
I look for people to inspire each other and when we disagree I look for disagreement that is grounded
in respect and empathy. I think that mockery and derision destroys the possibility of those
nuanced conversations. It drives away the quiet thoughtful empathetic voices and I try to give
those voices space to be heard, to shine, to exchange ideas whether we agree or disagree.
So if I happen to block you on Twitter I block you with love. Honestly I will never speak poorly of
you or even think poorly of you. I would love to hang out in person give you a big old hug and
talk about life over some beers. If you see or hear me say something stupid which I'm sure I do often
or something you disagree with and you still respect me as a human being please show your love
as I always do to you but also send me some links to blogs, books, videos, podcasts where people
describe why my stated idea may be totally wrong. I love this kind of long-form disagreement. I
humble myself every day by reading books and blogs by people much smarter than me. Sometimes it
strengthens my ideas sometimes it totally changes them but I always learn. This is a too long way
of saying that I'm here trying to walk with grace and with an open mind a bit of patience and always
love. If I make mistakes cut me some slack like you I'm only human allegedly. This is the Lex Freeman
podcast and here is my conversation with Nick Carter. What philosopher or philosophical idea
had a big impact on your life not just in the space of cryptocurrency but in general?
Oh so we're going now we're rolling. Going right in because you majored philosophy.
I did I majored philosophy I didn't know what to do with my life and my parents said do whatever
you find interesting it's like okay philosophy great find that interesting yeah and it had way
more of an impact on my career actually than I thought it might you know typically I guess if
you do philosophy go into law or finance so it sort of makes sense but there are a number of
philosophers I really admire the Bay one of my favorites would be Descartes probably the notion
of skepticism it's sort of a rabbit hole it's kind of hard to pull yourself out of it basically the
brain in the vat theory pulling yourself out of that but yeah I really like epistemology you know
questioning what it is to have knowledge so Descartes was one of my gateways to that.
Do you think everything is knowable like we humans can can know fully the objective reality?
Oh definitely not no I mean I reality is very much processed through your own you know subjective
lens. So how much do you think do we understand about this world because a lot of your ideas a
lot of things we might talk about today are kind of trying to figure out human civilization how
humans how human behavior works at scale all those kinds of things that kind of assumes that
we have it or we're able to somehow figure most of it out right so in your sort of when you step
way back how much of it have we really figured out? Well I think that's the conceit of economics is
thinking that you can model human behavior right and these unbelievably complex systems
and then I think that's the modern critique of economics like the sort of Tilebian critique
is that you can't have true knowledge and they're much less predictable than we think they are
and you know we behave according to our accumulated assumptions and we're using tiny sort of data sets
trained on the last 50 hundred years and they turn out to be horribly askew and that's when we
have our gray swans and our black swans so I'm much more on the sort of you know reality is much
less noble than we think side of things but it is nice to have very concrete things like Bitcoin
that's for sure. Oh so you think so most of it is shaky ground but there are some things there's
like islands of sturdiness. Yeah Bitcoin is one of them. That's a good way to put it yeah I mean
look at the dollar system not to pivot this into the dollar right away but the dollar is like.
That's a shaky ground. It's the dollar. Who truly understands the dollar system I mean
the totality of it the euro dollar system the way that monetary policy interacts with the economy
is monetary issuance inflationary what's the relationship between unemployment and inflation
even policymakers don't understand these things economists don't seem to understand them
what is inflation how do you define inflation none of these things are really known or knowable.
So a lot of people kind of make a claim that there's a lot of manipulation possible with the
dollar with those currencies if you couple that with the fact that people don't understand it
and yet there's claims that being manipulated by centralized power how do you bring those
two ideas together if no one understands that how can you manipulate it. I think what we don't
understand are the long-term consequences of our structures so like the feds mandate to target
unemployment and steady exchange rates or low inflation you know what we don't understand is
okay what is the result of doing that continuously for 40 years right what is the net effect of that
what is the consequence of the long-term accumulation of debt and you know basement
interest rates what is the net effect of that on society we might understand just much short
short term features of the system but I think it's the longer term features we don't understand.
Do you think there's like malevolent people with people that don't have good intent
in central banks like in the system you know when you have centralized power any forms
it's susceptible to somebody hacking the system taking the power and in the shadows this is where
conspiracy theories come in right in the shadows be able to you know act out things that have a
lot of negative impacts on a large percent of the population in self-ingreedy self-interest.
Do you think there's people like that or do you think fundamentally most people are good
even those associated with the sort of central banking? I mean I don't villainize those people
I think everyone is the hero of their own story right so they all believe that their
force are good in the world you have to are there any true villains I don't think so I think
they get socialized into a world where they believe their particular skills and their mandate is
you know what they should be doing I think they might be presumptuous or arrogant in some cases
and you know I think it's more of a systemic issue where you have
a small handful of very homogenous types of people with PhDs from the same institutions
that are brought up in the same cultural context that you know set policy and wield a tremendous
amount of control over society and I think they have this notion that you can tinker society
you can play with a few key variables and tinker society into a state that is desirable or good
and that's what they're trying to do and I think the consequences of that can be pretty bad
but no I don't think it's born out of malevolence there's an interesting idea I think Michael
Malis brought up as a test whether you're on the left or the right the question he asks which is
do you think some people are better than others if you say yes he claims you're on the right
right if you start answering if you start like saying a lot of things like you're on the left
so if you start explaining yourself well okay equifcating it's a good term for it
I was really so in this in this test I suppose I would be on the left because I'm uncomfortable
with the idea that some people are better than others as a basic feeling as a starting point
in the way you think about the world because as we're talking about everybody's a hero their own
story when you start to think some people are better than others as a starting axiom it's like
a slippery slope to where you think you're way better than others and then you start to like
basically it's okay to take advantage of a large percent of the population for the greater good
totally and then you go into Stalin mode and Hitler mode where it's okay to murder a large
part of the population for the greater good so it's like it's this very dangerous slippery slope
of my mind so I tried to not uh yeah I was always uncomfortable with that kind of test or even that
kind of thought and yes the same applies and suppose in in government in central banking is
if you think some people are better than others applying your idea what is good can have large
scale detrimental effects of course yeah I'm glad you didn't pose me the question I mean I think
it maybe not the left right axiom isn't uh the disjunction isn't the way I would sort of put it
but um you know to me it's just if you reason in a consequentialist way you know that lends itself
to authoritarianism yeah whereby you think you can shape society and only you can shape society in a
positive direction according to your you know specific objectives so let's step onto the land
of sturdiness that is bitcoin what is bitcoin and in your view what are you know the principles the
philosophical foundations of bitcoin well bitcoin the term I think refers to two things specifically
so one is the protocol for conveying value through communications channel so just a set of rules that
we collectively opt into in order to transact online or just add a distance and then the other
thing is the name of the asset the sort of monetary unit which circulates within the system
and that always confused people a lot because it's like well you got uppercase bitcoin lowercase
bitcoin why didn't satoshi just give them different names like in ethereum you've got ethereum
the system and then ether although people don't really talk about ether very much but
they you know chose to distinguish them in bitcoin for whatever reason they're not distinct
so the two bitcoins get commingled all the time in the explanations did you find that's a problem
that confuses things I mean what's what's really a distinction between the protocol and the currency
well they are sometimes distinguished practically like you can transact with bitcoin outside of the
bitcoin protocol for instance right so you know you can transact with bitcoin on ethereum or
I have bitcoin on a open dime here this would be a bitcoin transaction it wouldn't settle on the
bitcoin network do you mind explaining what you have on the table before us yeah so I brought you
some presents it's awesome this isn't a bribe this is just a proof of concept okay so this is
basically a bitcoin bearer instrument so I put a hundred bucks of bitcoin on here and to spend it
you have to basically physically destroy part of the device you have to poke a hole and you know
poke off one of the little transistors on this so it can only be spent once so and you can't
extract the private key from this device so the private key was generated on device always stays
on the device so what it means without like breaking off like a small part so this basically
is a way to physically instantiate bitcoin so it's um it's it's kind of gold yeah effectively
so here thank you so much this one's limited edition it's orange so what is it called again open
dime the point is if you wanted to settle a bitcoin transaction instantly the kind of the
same way that a cash transaction is instant final settlement right you would do it with a device
like this so if I was buying a house from you you know you might prefer to do it with a physical
bearer instrument as opposed to waiting for a confirmation on the bitcoin blockchain
so the moment I hand that over to you goes in your possession you're the owner
there's no way for me to have retained the private key like I could have created a bitcoin
paper wallet and given that to you but you have no assurance that I didn't copy down that you know
the key elsewhere so this solves that problem so this is a physical instantiation of the bitcoin
transaction outside the bitcoin protocol that's right see this is you're transacting the currency
outside of the protocol so it's analog bitcoin we're we're rendering it analog which I was like
because bitcoin is this immaterial thing and so it's nice to have physical totems how much does
it cost to manufacture this you know like 15 bucks or something I is it so this is just kind of a
almost like a philosophical statement versus something that's scalable for use like you know
the point of bitcoin is to be in the digital space right but this shows like bitcoin can be
anywhere it's useful for gifts but yeah I mean I don't know if it would be a suitable foundation
for a physical bitcoin economy in theory these would be like cash like instruments that you
could use to transact well I just mean post apocalypse yeah yeah but you still need you still
need to plug it into your laptop to actually verify that there's coins on there so you still
need the internet so I have to take your word for how much money is on here no I mean you can
you can plug it into your laptop and check yeah but to transact to extract bitcoin from this I
need to break yeah you have to poke a hole through the the little hole and that renders it spendable
basically so you know that's protection against you spending it and then representing that it's
still loaded that's that's a cool yeah so that the other thing I brought you're basically dice
12 sided they don't have any bitcoin on them so they just have a bunch of different critiques
of bitcoin on each side uh we'll go through them then this is awesome I don't know if we have time
to do all 11 because there's one with my phone's logo on it but um it's just basically a tongue
in cheek joke that the critiques of bitcoin are so formulaic at this point that you can just put
them on dice yeah um it's it's silly well some of them might be topics for interesting conversations
oh yeah we can even arrange the conversation that way you can roll the dice and see what you get
all right but first uh the the philosophical foundation is a bitcoin like how do you see bitcoin
outside of just a basic protocol and a basic currency it seems to be like you said uh it seems
like sturdy ground so what do you mean by yeah yeah so it's not just any protocol for moving
value around it's not just any currency it's got specific rules and values that are embedded in it
and this is an important point is the bitcoin is the encoding of certain values which are often
misunderstood or not acknowledged necessarily um and so it's sort of impregnated with values
and what they are specifically is a topic of debate and there have been civil wars fought over
the values inherent in bitcoin you know one of them was should bitcoin be this cheap scalable the
base layer low fee payments system with a emphasis on p2p payments or should it be more of this like
gold like digital commodity that would eventually settle infrequently and mainly between institutions
right so that's fundamentally conflict of visions right but the so you know keep in mind that this
is just one man's opinion i don't speak for bitcoin right so i would say the key the key
number one value that's embedded in bitcoin is the notion of non-discretionary monetary policy
so algorithmic monetary policy as opposed to human based monetary policy satoshi was very clear
about that bitcoin is an alternative to modern central banking where you have constant tweaking
constant intervention which satoshi felt leads to credit bubbles and so on so bitcoin proposes a
completely non-discretionary monetary policy um sort of decays over time 50 percent of the coins
we're shooting the first four years and then the next 25 percent the next four years then 12
and a half percent the next four years until you get to 21 million units and none of those numbers
really matter like it could have been 25 million units and it could have been a more aggressive
slope or a more gradual slope but what matters is that this schedule was proposed even before
the code was public the schedule was proposed and then we all collectively agreed to stick to it
and that is kind of a first for monetary system i mean gold kind of has that property right because
gold the supply of gold above ground only really increases at one to two percent a year so it's
it's sort of inhuman which is a good feature right you don't want to give humans that much control
over it bitcoin is a much more you know fastidious approach to that it really is super concrete about
what the supply schedule is and the fact crucially that it can't change so we can't have a bail out
of debt or as it was a lot of people let's say a lot of people had debts denominated in bitcoin
and we needed loose accommodative monetary policy to bail them out that's not possible we couldn't
have a jubilee denominated in bitcoin because the social contract that we've all you know bought
into and committed to is that it's not as non-discretionary so that's sort of one of the first things
and i think ultimately that comes back to basically a strong respect for property rights
because if we were to have unanticipated inflation let's say you know really charismatic leader
somehow commandeered bitcoin and convinced everyone that we should have 30 million units and not 21
million that would basically be dilutive on everybody that held bitcoin and had opted into the
21 million set of coins an additional 9 million unanticipated would have a dilutive effect on
everyone else and that would be a covert way of effectively stealing their purchasing power
through inflation is that possible that kind of thing i mean uh what what's the mechanism of
bitcoin that resists that kind of charismatic leader well we've had people that have had a
lot of influence in bitcoin in the past and they've tried to make changes to the protocol not as
dramatic as that but bitcoiners have generally resisted those individuals institutions and they
you know bitcoin itself a good track record of sort of staying true to to those core values
so that you know there you mentioned values and and like sticking to the monetary thing
but there's bigger values there's almost like psychological values there instilled in bitcoin
you make a point that bitcoin for many is a vessel quote for their expectations hopes and dreams
can now the bitcoin protocol support this kind of complexity of the human condition
so like there's ideas of freedom that seem to be spoken about there's a sort of ideas of
of i mean even love yeah i mean some people kind of use it as a meme like you know bitcoin is love
or something like that you know mostly to troll me because i talk about love all the time but you
know these bigger ideas than just the exchange of currencies yeah i mean bitcoin itself is very
simple i would say like ultimately it doesn't you know pretend to do very much it really
just settles transactions but people do superimpose their own views on it for sure
and bitcoin's qualities give rise to these perceptions of it having censorship resistance
or giving you transactional freedom or a measure of transactional privacy
so because anyone can operate a node and join the consensus process and because mining is a
competitive free market process that means that it's likely that you can't be censored
by the miners so that means you have transactional freedom so you have these computer science
technical features of the system that cause it to have these political qualities which is
it's very hard or impossible to censor a specific individual so it's it's interesting to see that
flow but so that's one of the core values for sure is is the censorship resistance
then you have the fact that it's a cryptographic based system and you can hold value in your brain
by memorizing 12 words for instance that gives it seizure resistance which is again a political
concept if you wanted to desert your jurisdiction with your wealth intact in your brain you know
that you know cryptographic feature of the system the fact that it's built on public key
cryptography and that you can encode a bitcoin private key in 12 words that gives it this political
salience that you know you can you're now empowered relative to a despot basically yeah i mean
there's so many beautiful concepts behind cryptocurrency behind bitcoin that stand for
sort of freedom some of the basic things at the founding of this country the one thing i don't
like personally behind bitcoin and cryptocurrencies that money is involved and it's like people's
life savings sometimes are involved so there is naturally a kind of fear a self-preservation
like instinctual kind of dogmatic thing that comes in where you're not the best of human
nature you stop being a george washington and you lose touch of the like foundational principles
which i think are beautiful just like the founding principles of this country so that's just like
so i like staying on the level of like the philosophy versus the level of like all my
money is invested in bitcoin and that that becomes very tricky territory to have
have principal discussions yeah about ideas well it's an interesting tension i try to
stay balanced despite being very exposed to bitcoin so let me ask the ridiculous question
just in case who is satoshi nakamoto and is it you we don't know it's probably not me because
i was um like 17 when satoshi mounted bitcoin 16 so unlikely and also not really a programmer so
there's a lot of theories but honestly it's one of the greatest mysteries of all time because even
bitcoiners that have been around since day one really you know people that were around
before bitcoin came out they're on the mailing list they were active in the cypherpunk community
you ask them and they sincerely will not know and they may not even have a good guess as to who
satoshi is is it important to know or is it like actually important not to know do you think that's
a feature a bug that you we don't know some people don't like the uncertainty especially
you know folks on wall street they really want to know and if you read the coinbase s1 their
um disclosure pre-ipo that's a risk factor that satoshi could come back so the the risk management
crowd wants to know because they want to know if maybe satoshi had you know undesirable political
opinions or something that would forever taint the project do you think they were just trolling with
that risk with uh was satoshi's identity being a risk factor or is that like actual like was there
an actual meeting and a discussion of that being a risk factor i think in the risk factor sections
of the prospectus is it's really just the lawyers doing a total brain dump to cover absolutely
everything they can think of so it's just lawyers it's not like uh you know it's like uh i think
elon was somewhere in the legal documents for spacex mentioned that like uh earth governments
have no jurisdiction on mars like they threw that in there and it feels like yeah that could be
lawyers but it could also just be elon trolling yeah so i wonder if like the coinbase folks trolling
or if uh i don't know if it's lawyers i hope it's the trolling not the lawyers the the coinbase
leadership they're not as big uh trolls as elon is but uh i mean it's a it's a risk for sure from
their perspective because let's say satoshi returned doesn't seem likely and let's say they
decided to spend all their coins which also seems very unlikely um that's you know rumored to be
or estimates have it at one to one point two million bitcoin which is like 50 60 billion
dollars worth so some people consider that to be a risk you think it's uh you know this is almost
like a topic of leadership it doesn't feel like anybody any one person speaks for bitcoin
uh not there's not even like prominent figures like you have for like a theorem you have italic
buterin it doesn't there's a lot of like top minds talking about it like yourself but it's not like
one or two do you think again is that a feature a bug like uh do you think for effective for bitcoin
to effectively have a role in um society that like is as large or larger than the dollar there needs to
be like leadership that represents it almost like democratic kind of thing well that's a real
counterintuitive point because most bitcoiners including myself would say no the lack of leadership
is a great quality to have because if you have a charismatic leader and a foundation or corporation
that controls it maybe they can control the features of the protocol and maybe they can
expropriate holders of the coin or you know build in an endowment that pays them off and
gives them privileged access to the units of the coin for instance so you know we call people that
have privileged access to the money spigot cantillon insiders which is there's this economist
that pointed out that as you know i think richard cantillon that as money enters the economy it
has an uneven flow right so you see this in last last decade or so before that too the consequence
of money printing in this country is people that own financial assets made a lot of money and people
that didn't didn't so you see that cantillon insider cantillon outsider effect and it's the
same with the cryptocurrency in many other alternative cryptocurrencies that do have these
corporate entities or these leaders and CEOs they're able to make specific decisions regarding
the protocol and the currency of the asset the benefit themselves their cronies etc and that's
not a good feature to have i mean it does grant you you know the ability to orchestrate decisions
in a faster and more efficient way but long term what you're trying to optimize for if you're
creating a money is monetary credibility and soundness so you don't really want it changing
all that often and you don't want to have the appearance of you know these elites that are
engaging in rent seeking or anything like that so there's definitely people that are influential
in bitcoin this core developers that people listen to because it's i would say of meritocracy largely
and they're sort of self-appointed high priests of the protocol i write a lot about bitcoin people
listen to me but it's a completely free market of ideas right i don't have any authority within
bitcoin whatsoever i'm just a scribbler you know she's just a scribbler was so was Aristotle uh
socrates and Nietzsche okay at the high level uh technically how does bitcoin work is there
interesting things you could say like what are miners what are nodes full nodes what are blocks
what's proof of work is there a a nice way to wrap up a clean explanation of the protocol
oh man let's uh that could be a whole that could be another five hours is there interesting because
i'd love to talk to you about block size wars and sort of the the the politics of psychology
the principles around that but sort of building up to that it'd be nice to talk about how the
thing works that's fair i mean and the block size wars are really fascinating discussion of how
governance debates intersect with technical features um so i guess we can yeah so basically
at the highest possible level bitcoin is a globally shared uh it's really a replicated ledger that
um any participant that wants to be an equal peer on that ledger they want to maintain that ledger
and they want to stay up to date with the global state of the ledger um and really any monetary
system is just a ledger with uh physical cash um we benefit from the physical instantiation
of the money so the physics is the ledger the physics is the ledger right uh same with gold
right you can't just produce new units of gold so we trust that gold atoms are hard to create
although not impossible right um you could fire a bunch of protons that whatever is the adjacent
metal uh and create gold atoms would be expensive uh and the same with dollars you know we trust that
it's hard to counterfeit a dollar so we trust the physical analog world to help maintain the
state of that ledger with digital money like um you know the money in your bank account your
checking account we basically trust our institutions or banking institutions to keep a faithful record
and then ultimately we trust the central bank to administer that system so there's kind of a
handful of nodes in bitcoin we trust that the economic incentives of the system are carefully
poised basically so we trust that the free market and mining competition will lead to the miners
assembling transactions into blocks in a faithful and correct way and that we are going to converge
on a global state of the ledger continuously which updates every 10 minutes or so with some variants
and then the miners aren't the sole entities that control the system to really participate
if you are a merchant and you're accepting bitcoin you really want to run your own full node
and check the whole history of transactions sort of something like i want to say five to
six hundred million transactions that have ever occurred on bitcoin so full node contains all
the transactions ever transacted on the bitcoin blockchain and that's i saw it's like 200 gigs
or something like that like 350 something like that it's doable on a regular consumer laptop and
that is going to be really key later on in the discussion but so you know that's really the
ultimate trust models first of all we trust that the miners that assemble transactions into blocks
and they are the archivists you know they inscribe those transactions onto the ledger
and they have an economic incentive to sort of behave correctly because they're getting paid
in no units of bitcoin that's part of it but then really you are also you're not fully trusting them
you're actually if you want to run a node you replay every single transaction in the history of
bitcoin from the beginning to the current day and you arrive at the present state that way so you
don't really have to trust too many people or entities you can validate the correctness of
that all the rules have been followed that all the bitcoins that were created were done so in the
valid way that the inflation rate was adhered to and that there's no covert inflation you know that
that if you're spending 50 units of bitcoin you had that bitcoin to spend in the first place
so it's sort of delicately poised between node operators who you know engage in this validity
checking kind of anti counterfeiting checking and then also the miners which are an industrial entity
and they basically produce block space and assemble transactions into blocks
and everybody so the miners are incentivized to not mess with the system because they're getting
value from the system so if they mess with it it's going to decrease the value of their physical
work investment yeah so they have to incur a real physical cost to produce a block right so
right now you get 6.25 bitcoins in a block at a minimum and then maybe some fees as well
and how hard is it to produce a block now well challenging i mean you need uh
so 6.25 bitcoins and a bitcoins worth $55,000 or so so it's probably going to cost you about
that amount to produce it because it's a free market competition and miners have very free
thin margins so it's like if i auction off a dollar you would pay up to 99 cents to buy that
dollar for me it's exactly what happens with miners they're you know basically competing for
the right to obtain new units of money so logically speaking they would pay up to the value of that
money in order to earn it and for people who are not familiar the process of mining is solving a
difficult cryptographic problem that's a computational problem it's i would say it's not like
people sometimes represented as like a really challenging puzzle like the individual puzzle is
very simple like you can do with pen and paper if you wanted you know like shaw 256 it's just that
you're searching through the big mathematical space to find the needle in the haystack you just
do lots of iterations of a simple puzzle it's just brute force hence like the stability of the whole
idea of the proof of work if it was a if you if there was a shortcut it wouldn't be it wouldn't
work exactly so let's hope nobody solves shaw 256 yeah there's a lot of discussions in from the
quantum computing space but at everybody i i talk to all my colleagues and that work on
quantum computers uh say this were quite a way quite a long way away from that being an issue
in uh cryptography and then and certainly an issue in cryptocurrency that should have been one of
the sides on these dice should have been quantum quantum because i don't think it is i forgot to
put on this edition people should check out scott erinston uh there's a lot of people that are kind
of um selling quantum snake oil uh so you should be very careful i think it is a really exciting
space that might change the world in the next decade or a hundred couple hundred years especially
for simulating quantum mechanical systems but in quantum machine learning people should check
out tensor flow quantum it's a nice way to sort of educate yourself about the space and actually if
you're pragmatically minded to you know through software engineering explore how you simulate
quantum circuits how you run machine learning on those quantum circuits the the main point that
scott makes god erinston people should check out his blog too is that like there's not yet a single
machine learning application that doesn't do almost as well on a classical computer so it
doesn't like yes the dream is somehow uh quantum computers will change the nature of artificial
intelligence but there's yet to be an actual algorithm that uh or a problem set or a data set
where that would be the case so skepticism is good in the space anyway that said so you kind of
explained uh how bitcoin works you also wrote a blog post recently giving a shout out to the new
book the block size wars what is the block size what are the block size wars its history its importance
its uh philosophical foundations yeah i mean bitcoin at this point we have our own civil wars
if you're wondering about how politically intense it gets it's currently not hot it's cold it's oh
yeah we're in a detente right now there's no tanks or missiles at least not yet hopefully it can get
a little violent i guess i think one of the bitcoin core developers or one of the participants in
the war got swatted at one point what's swatted means when someone does a fake uh phone call
saying that you're holding someone hostage at your house and the swat team goes
it's pretty cool wow internet warfare tactic yeah but uh the block size war i would say
effectively ended um although we're definitely going to have more civil wars in bitcoin for sure
but basically the core argument was a technical one on its surface but a very deep political one
at its core the technical question is how many megabytes should be in each successive block
so satoshi basically installed a limit of one megabyte per block so we should backtrack there
was no limit in the beginning and it seems like satoshi what is this 2000 the war started in
what 2017 or something like that i don't know when the 15 was when the you know the battle
cries began what was the first battle in the civil war i don't remember but sort of satoshi
i don't know if you can comment on it like why did satoshi set the limit to one megabyte all
of a sudden almost secretly and in the beginning there was no limit whatsoever yeah i mean we
can get into and people have spent thousands of hours pouring over satoshi's writings to find
you know which side satoshi was on and you can find like any textual exegesis you can find
evidence for either side right but yeah i mean effectively when bitcoin was launched there was
a block size because if you made a block over a certain size with the first edition of the code
it would have crashed nodes but then yeah in 2010 satoshi added the one megabyte limit in a
covert way with no comments or anything and that's stock basically and then bitcoin blocks filled up
and people that had been socialized into this vision of bitcoin as an effectively free transactional
network like why pay a transaction fee if you're not at congestion if the block isn't full the
miner will mine your transaction for free right um people that had been brought up in that status
quo from 2009 to kind of 2015 they noticed the block started to fill up and they're like okay well
let's just remove this arbitrary limit right what what could possibly be the harm right and then a
whole other faction said no you need to cap the data throughput of the system because if you increase
it it's going to be highly exclusionary and ultimately regular folks who are not going to be
able to run a full node so there's a fixed number there's there's a fixed frequency of blocks and
so if you want to increase the number of transactions per second you want to increase the size of the
block so huge blocks allow you to shove in a lot of transactions right small blocks don't so that's
what you mean like constraining the system so what's the benefit of a small block size where
transactions uh when you can squeeze in only a small number of transactions and what's the benefit
of a huge block size where you can squeeze in a lot of transactions well it really comes down to
the way you think about the system so a lot of people wanted bitcoin to be visa scale so
do you have blocks sufficiently large so you could accommodate a visa level scale of transactions so
which is many orders of magnitude more transactions that's right i mean preposterously larger in
terms of data throughput then you know bitcoin offers up or at least it used to 144 megabytes of
space per day and your average transactions 350 bytes so you know you could add a push to
four 500 000 transactions a day which is not many so if you wanted to get to visa scale you'd have
to increase blocks obnoxiously large uh the small blockers claimed that this would overwhelm the
ability of any regular person to ingest that data and stay current at the you know state of the ledger
to rebroadcast to replay all those transactions to ensure that the protocol rules were valid so
basically the small blocker contention is that you eliminate the trustlessness of the system
by pushing a ton of data through the system because only one or two industrial heavy duty
nodes would ever be able to run the protocol at that point so by the way in the civil war the two
sides is your is your calling them the small blocker and the big blocker sides and so that
takes us back to the the thing that you mentioned that a regular computer could be a node and uh
with a big with big blocks that's no longer going to be the case so just the number of
transactions is going to blow up the size of the blockchain that every full node has to store
and so then as opposed to a regular mom and pop type of node you're going to have to have data
centers so they're going to have to be owned by large organizations there's going to have to be
very few of them and that's how you centralize the control over this whole uh operation so the big
blocker uh yes it allows you to be visa and do a huge number of transactions but it becomes
centralized and the small blocker is you cannot actually do kind of merchant style transactions
but you get the decentralized benefit well i don't even think the big blocker approach would allow
you to be visa frankly because there's effectively one node at the visa network right um so you don't
really need to maintain this peer-to-peer architecture at all and the amount of data you'd
have to push through the network to reach visa scales are really preposterous amount
i mean and we have now evidence for what happens when you try and scale up as a blockchain and
do 10 million transactions a day which is still not visa scale right you know i've i've you know
seen what it's like to operate those nodes and it's not pretty so there are totally genuine computer
science physical limits um because it's a it's a broadcast network everyone has to be aware
of every transaction and that model which gives you the trustlessness the nice guarantees where
everyone's an equal peer on the network everyone has audited the full history of the transactions
that model falls apart under stress so the small blocker vision is that ultimately
you would scale in a layered approach with the base layer transactions being settlement style
transactions and you know payments happening at the other layers basically is that university
agreed upon or like to a large degree agreed upon that the small blockers have won in this in this
debate well where would you put the the current state of affairs there was a wave of competing
bitcoin implementations in starting in 2015 with bitcoin xt um actually gavin anderson who is the
guy that satoshi handed the reins to when satoshi left gavin supported this large block block
proposal uh and so that was that didn't achieve consensus and then there was bitcoin unlimited
and then later on there was a genuine hard fork where the small blockers couldn't or the large
blockers couldn't push through their proposals on bitcoin itself so they just created a competing
version of bitcoin you know so by the way uh so maybe you can comment on but sort of hard fork
versus a soft fork a hard fork is when it's not no longer compatible what's the right way to put it
they can't operate on the same blockchain the same with the same protocol yeah so there's
a few ways to define them and it's pretty it gets controversial as well but um one one way
to define it is a hard fork is a expansion of protocol rules and a soft fork is a shrinking
of protocol rules that's an interesting way to find it it's not very intuitive so i don't like
that way um another way is that a hard fork is backwards and compatible whereas soft work is
in theory backwards compatible so in in august 2017 basically the large blockers had had enough
and they said we're going to hard fork bitcoin we're going to create a clone an alternative
version of bitcoin which has the same a shared history as bitcoin itself but you completely
fork it and you create a new future and uh but you know everybody that had a balance on bitcoin
at the time also had a balance on the alternative coin bitcoin cash and so that was really that's
what it's called bitcoin cash is the hard fork that was one of them there were more actually
i mean what the heck is bitcoin satoshi satoshi's vision bsv bitcoin sv so this is all talking about
increasing the max the limit of the block size more and more and more yeah that was one of the
changes they wanted to push through uh but bsv was a fork of bitcoin cash so hard fork of bitcoin
cash yeah so and so now there's multiple big blocker blockchain's floating around it's like
what are your thoughts about them well i was it's pretty popular sorry to interrupt uh are they
popular i mean if you look at the metrics they're not and oh they they don't trade they i think each
trade below one percent of the value of bitcoin itself so measuring popularity is like how much
they actually oh value uh value frequency of trade oh no no i mean they they do like a fair
number of transactions but there's an there's no way to know that that is genuine or just contrived
so you know ultimately the true measure i think in my mind is just where the market
prices these protocols relative to bitcoin uh because that's like a prediction market
if if bitcoin cash was being priced at 50 of bitcoin you could say the market has given it a
50 percent chance of unseating bitcoin right but both bitcoin cash and bitcoin sv which was a hard
fork from bitcoin cash itself are well i believe at this point well below one percent of the value
of bitcoin and in the in like the ranking of different cryptocurrencies what is the bitcoin
ethereum is ethereum in value uh yes number two and then bitcoin cash is the one that it's in the
top five right but just a fast drop off you know i haven't checked lately but i think it's it's reached
kind of morbidity you know it doesn't really have much traction um the blocks aren't full so the whole
value proposition was you know we will get all this merchant adoption if we increase the block size
that just didn't materialize in my view they had a flawed vision of how adoption works and what
blockchain should optimize for uh maybe maybe you get a bitcoin cash supporter on the show they give
you a different answer but yeah full disclosure you know have my sympathies and i think the small
blockers one that's girmish for sure so at this time there's no merchant adoption and so on so
it's kind of its vision the whole reason for existence for at least for now hasn't materialized
and so that's that's an indication as possible that well it's a sign that perhaps that's the
wrong way to accomplish the scalability well you know first of all i think the layered scaling model
is definitely definitely correct i mean that's absolutely the way these things have to work
given the constraints of blockchains what is the layered scaling model it's really how all
payment systems scale blockchain or otherwise and i think a lot of people don't understand this
is that there is no equivalent to scaling of the base layer in the regular payment space
that totally doesn't happen all of them are built on layers so visa is like the fifth layer
in the payment stack that ultimately depends on these utility scale settlement systems like
fedwire chips a ch basically interbank settlement systems so you've got these slow moving but high
assurance settlement systems uh fedwire is probably the number one you know like when you
send a wire that's using the fedwire system typically on top of that you know you have banks
and then you have payment processors and then you build up these layers and layers and layers and
then you have these fast payments you know venmo venmo PayPal credit debit visa you name it those
payments are not final when they occur you know a credit card transaction will not be final for
90 to 120 days so that's fascinating you've decoupled the payment the financial message
and the settlement those are distinct concepts and the settlement happens on a deferred basis
so that's how you get scalability is you have lots and lots of messages but that they don't
settle for a long time they might settle on a net basis on an end of day basis but so that's
really how it works and then you've fedwire where your average transactions in the millions of
dollars and there's only a few hundred thousand transactions a day that's sort of an interbank
settlement network so that's my vision for how i think bitcoin will develop too bitcoin itself
on the base layer is this slow moving high assurance final settlement network where if you're
sending money to the other side of the globe to someone you don't trust where you want that
payment to be final in a short period of time and both counterparties know it's final then you
would use that but if you wanted to buy coffee you could do it on a second you know second layer
lightning would be one way there's a bunch of side chains now or you could use you know a more
centralized solution if you wanted it's kind of a profound idea that in the space of transactions
when you're buying coffee or buying anything really from merchant or exchanging goods and all
of those kinds of things that most of the time like basic honest behavior human behavior which
it does appear that most of our societies is based on the fact that we're all most of us are honest
is like stuff is not going to go wrong when you do the transaction and you only need like the base
layer whether it's bitcoin whether it's uh i forget the terms you use for the for the credit card
version but you need that just to verify just to like resolve any disagreements or shady shit
yeah and and that's a really rare occurrence so it's okay for that to be handled uh in this in a
small block debate handled at a rate that's much much lower than the rate of the transactions
that's a kind of that's a really interesting idea that when we spend money we didn't actually
exchange the money most of the time yeah most of the time you're not getting a final settlement
when you do a transaction and oftentimes that causes there are there's pluses and minuses on
the plus side of huge efficiency if you use a credit network like visa but that it's in the
name credit right visa is extending you credit right they're kind of guaranteeing your reputation
to the merchant but fraud happens all the time right there's always fraud because you have this
reversibility right um and so you can you know engage in fraud against the merchant um if you
have a final settlement there's no possibility for fraud so that's one reason merchants kind of
like accepting bitcoin because once you receive an inbound bitcoin payment and you deliver some good
or service you know that payment can't be reversed but frankly most of the transactions we
you know undertake on a daily basis do not require those strong assurances of final settlement
there's one exception which is physical cash with physical cash or the open dime a cash like
product you actually are getting final settlement but online most online banking transactions most
p2p uh digital wallet transactions in the dollar system they're not really final at all you mentioned
lightning lightning network what is it what are your thoughts on it and what are your thoughts about
any kind of alternatives so lightning is one potential payment solution built on top of bitcoin
where you have different assurances different transactional assurances but ultimately it's very
proximate to the base layer so if something goes wrong you can always basically settle to the base
layer layer two yeah layer two you could say and basically the intuition is it's kind of like opening
a bar tab so you go to the bar and you might drink a dozen beers over the course of the night
maybe half a dozen um and well i guess nobody goes to the bar these days but let's say you
did yeah you open a tab and at the end of the night you settle up once you're not necessarily
paying each time you get another beer so it's just it's the same idea you're opening a channel an
ongoing relationship with your counterparty and so lightning has you open a channel with a counterparty
and you're sort of sending back and forth these cryptographic commitments saying you know i agree
to send you some bitcoin but you don't necessarily settle each time you make a transaction so you
do hundreds of thousands of transactions in a channel the other thing lightning proposes is
saying okay well now that we have channels established what if we interlocked a number
of channels together so if you and i have a channel and you know me and my buddy have a channel my
buddy can now pay you because you're you have a relationship through me basically and so lightning
is this network this overlay network that sits on top of bitcoin and allows people to transact
in a much faster and less frictional way without the need for bitcoin's kind of slow periodic
settlement um assuming that everything sort of goes well uh do you see any downsize to this like
have you seen flaws in the whole system from the security perspective from a scaling perspective
any of that or is it is lightning working well it works i've i use it um when i initially sold
those dice i sold them on lightning it was one of the first merchants to use lightning back in the
day uh the first edition of the dice so people could buy these dice somewhere well they used to
be able to haven't made a new edition recently they're very scarce and very special they're like
physical NFTs just kind of yeah i mean the flaw with lightning is really that you you know and
this can be remediated in a number of ways but you have to sort of pre-fund these channels so it's
it's a weird concept to have to inject liquidity into a channel in order to accept a payment you know
so i'm sure those user experience problems can be solved but it's still uh in a state of relative
immaturity so we'll see in terms of other ideas that are sidechains or soft forks of bitcoin
you've mentioned something about snow and taproot um what are your thoughts about this update to
bitcoin and in terms of its promise to improve privacy and scaling and so on and what what other
things are you interested excited about in terms of the development of bitcoin well snow and taproot
that's the first new protocol upgrade since segwit uh in 2017 which was what um laid the
groundwork for lightning to be developed basically and snow taproot is really the first protocol
change in three almost four years now so it's we're very excited about it what uh what are i mean
is there anything interesting to say technically about what are the things that's actually going
to improve and um maybe on the on the politics side bringing a protocol change uh on bitcoin
what does that actually involve yeah i mean it's a huge deal because the last time we tried to make
a change to the protocol we had whole civil war over it and it was incredibly difficult to get
segwit activated in 2017 and it took all this bricksmanship and threats and all these campaigns
and it was this whole thing luckily i think things have quieted down and there's much more
consensus that snortaproot is a good change to bitcoin everyone generally supports it but
everyone kind of has ptsd over the last time when we tried to change bitcoin and so we're sort of
really dithering over how we actually want to implement it so it's taking forever because we're
trying to set the protocol for how do you change bitcoin itself and that all of our assumptions
went out the window last time so we're trying to reset and decide what is a legitimate way to
institute a change to bitcoin so that's actually the big question right now it's not should we
implement these changes we basically all agree that we should it's a meta question is what's the
valid way to implement new changes to bitcoin what's a way that is scalable in the long term and will
last and people consider credible even if this one isn't controversial at all so that's where
we're at we're basically debating over how do we implement this change that we all want to get a
feeling of how slow bitcoin governance is and how deliberate it is everybody collectively wants
the change but we haven't fully agreed on how we're going to put it into bitcoin so it's the
classic sort of bitcoin situation but what it is is I mean Schnorr is an alternative signature
scheme I think it was encumbered by a patent and it had only just been unencumbered when Satoshi
created bitcoin I believe it's a better signature scheme than elliptic curves which is what
than ecdsa which is what bitcoin uses and so it's been long enough that we now trust it
you know kind of in cryptography it's meant to be lindy you know it's sort of you want to test it
over time and then it's considered safe to use so Schnorr has been around for long enough that
we've decided to rip out ecdsa and insert Schnorr which is just a different signature scheme which
is more efficient and it has better properties like if you want to do a multi-signature transaction
where many people collectively sign in order to permission to spend that would be more efficient
in a bytes sense than ecdsa for instance so it's pretty incremental and then taproot is all about
having transactional conditions that are sort of withheld from final entry onto the blockchain
so it's kind of a way to have more private conditional transactions on bitcoin so both of
them I would say are incremental changes is this an over exaggeration that's not to approve my
improved privacy and scaling which is it like at the high level things that people mention
is that just like a dramatic way of trying to frame what's fundamentally an incremental
improvement yes but incremental is the word right it's not we're not going to get an order
of magnitude enhancement to either privacy or scaling but we will get a considerable enhancement
but privacy and scaling are actually two sides the same coin because you get more transactional
privacy by removing data from the ledger so that there's less metadata for people to
surveil and analyze and that's also you scale by compressing and being really space efficient
with transactions and the more parsimonious you are the more economically dense each byte
that everyone has to retain on the ledger is and so those are you know very closely allied concepts
so do you mind if we go through some potential criticisms of bitcoin totally I spent the last
five years you know tackling these every day so the dice the same those two are the same yeah
there are three additions so let's go okay go with the dice what do we got silk road
what does that mean road classic classic situation so I mean that was the dark net marketplace set
up by Ross Albrecht in the early days of bitcoin that's one of the first killer apps for bitcoin
was being the the payments network behind this dark net marketplace and you know where you'd
go to buy drugs and things and so that became associated with bitcoin if you remember the
press coverage from back then but over time that faded and it became less of a critique but
so like the the critique is that bitcoin is something you would use for illegal activity
for drugs for crimes all those kinds of things as opposed to for any kind of legitimate transactions
yeah and the merchant transactions and today bitcoin settles 10 billion dollars a day and
the vast vast majority of it is you know completely legitimate it's just a useful
alternative system but back then a huge fraction of all bitcoin transactions were related to the
basically illicit marketplaces and if you're just tuning in this incredible 12-sided die
has 11 common criticisms of bitcoin that yeah in a genius way has put together maybe you could
do a couple more oh it was Satoshi something Satoshi coins Satoshi coins we touched on that
early in the episode what if Satoshi returns and sells all of their coins so we don't know for sure
how many coins Satoshi actually mined or produced because there's a degree of probabilistic analysis
that you would do there's a few few thousand blocks that were mined by what we think is a
single entity in sort of 2009 and so if you add them all up you get to about a million so people
think that Satoshi mined a million coins and then they're worried that Satoshi would return and
market sell all the coins thus crushing the price of bitcoin so looking at some of these
uh no CEO I think we did we see we've already hit on the uh no merchants that that's no longer
true about that yeah uh there's a scalability one and I think that one is addressed the idea
that you're mentioning with the block size debates and the lightning network that by adding extra
layers on top you can you can achieve scalability that's my vision that's my theory um and you
know you can do it in a permissionless and a permissioned way like coinbase is a big bitcoin
exchange they provide scalability they're a financial institution you know you can settle up
internally on their own database and then you know periodically settled to bitcoin so oh so they
don't uh they do something like the lightning network internally so something like this some
little kind of mechanism well honestly I'm not sure exactly how works they might have that built
in but just generally speaking institutional scaling is a model for scaling right where you
could have banks holding bitcoin and they issue notes against bitcoin and those are your payments
and then the base layer is the settlement layer I think that's what you're getting with the
the boiling oceans is this is like the impact on um weather on the environment on the environment so
you know that that is a concern that people have in terms of like the proof of work requires that
there's a lot of computational resources and uh being used and that requires a lot of energy and
like some large percentage of the world's energy is used to to mine bitcoin what's how
how would you respond to that criticism yeah I mean that's been the loudest critique of bitcoin
this year in the press this year really yeah so I mean it's not like a new criticism but bitcoin
is consuming more energy than ever so as the price rises the electricity consumption rises and so
we've we've we've heard renewed uh you know belly aching over this for sure I mean it's
if you don't believe that bitcoin is useful then you're inclined to think that all the
energy consumption is a waste so that's you know it's it's something that's sort of unrebotable
if you fundamentally contest the validity of the bitcoin system so if bitcoin is like a thing that
will take over will become like the main mechanism of financial transactions or transactions period
in the world then you say well the cost of energy use is actually quite low well it's the benefit
it provides if you think it's not going to be if it's just a volatile way to to make a little
money in the short term then you see the energy use is really wasteful it's totally spurious yeah
so so then there's no really response I suppose that's so I can totally you know get into the
details of bitcoin's energy mix and things like that but that's like at a high level what the
debate is it's this normative question like does bitcoin have an entitlement to consume any of the
world's resources and that's actually where the debate should end much of the time because a lot
of people fundamentally dispute the the validity or usefulness of bitcoin as a system and so of
course they're going to consider the energy usage illegitimate now there's a lot of mitigating factors
if you you know think the bitcoin is a potentially useful system which is bitcoin consumes energy
in a very peculiar way which virtually no other industry does which is that bitcoin is a geography
independent buyer of energy which is not how we humans typically consume energy like we need
energy to be produced near to population centers and we needed to be produced at the you know
corresponding to the peaks and troughs of our consumption right because we have to 100% match
the demand in the supply at all times right otherwise we have blackouts so bitcoin doesn't
care about any of that it just buys energy on a constant basis and so it's you know indifferent
to where it's being produced and so the the consequence of all that is that bitcoin will buy
energy that's otherwise being wasted basically so it will buy so-called stranded energy assets
that would not make it to a population center and in fact most energy produced is ultimately does not
sort of make it to you know your your socket in your wall and so this is why so much bitcoin is
mined in china for instance it's not because you know chinese industrialists had a special
affinity for bitcoin it's because the chinese grid had a massive overabundance of energy
in particularly in four provinces situ on unan in amongolia and zheng jing so in those four
provinces those are all pretty distant from major population centers so because of that you can't
really transport the energy that easily and so huge amounts of energy are curtailed or basically
wasted in all those provinces and so miners set up shop there because they could mine bitcoin with
the excess energy they could monetize this thing that otherwise was going to go to waste so you
know there's things like that which you know i think mitigate the the reality bitcoin is not
really rival with our consumption of electricity it's not depriving anyone of electricity it's
mostly these stranded assets that are going into supporting the bitcoin network so maybe
let's do a last one since you mentioned china says china control so if so much mining is happening
in china how do we not uh how do we prevent nation states from controlling much of bitcoin
yeah that's the flip side of a large portion of the blocks being mined in china due to this energy
feature which i discussed which is that there's a lot of chinese miners for sure now the question
ultimately is what degree of control do miners have over the bitcoin system right and that
was part of the block size debate i mean the miners there when we implemented segregated
witness in in 2017 the miners just didn't want to do it eventually the users the regular folks
running nodes rebelled and basically said look we're going to implement this whether or not you
do it and it was a threat to the valley of bitcoin because if this threat had gone through it could
have split bitcoin and it would have been really messy so the miners sort of capitulated so i think
the current consensus is that miners do not have unilateral control over bitcoin and that
governance is more poised between people that run nodes developers and miners it's sort of a
triumvirate where neither of them has you know total control so that's my current model for
control in bitcoin i think if you asked a miner they would tell you they didn't feel that they had
sort of unilateral control over bitcoin either almost as a thought experiment can i ask you to
think about if you're if some of your predictions some of your analysis some of your understanding
of bitcoin is wrong in the in the following sense where it will not have the impact that you have
a vision for it that you will not to have the scale of impact and perhaps in terms of value
will go to zero to something very low and other cryptocurrency or other financial systems will
overtake it what would be the reason for that in your mind like why might you be wrong if you look
back at it yeah in the future what did you not understand about bitcoin that will result in that
yeah that's a great question i think for that to happen one of two things would have to obtain
one of two things that have happened for bitcoin to just be irrelevant basically
either central banks totally clean up their act and you know stop engaging in rampant money
printing which i don't expect that to happen anytime soon i mean it looks like we're normalizing
this new regime of inflation you know pro inflation to remediate the the debt issues we have so that
would be one thing that would make bitcoin cryptocurrency much less relevant as if everyone
becomes totally assured of the soundness of sovereign currencies basically namely the dollar
like the dollar being the main one uh that it seems like we're going in completely opposite
direction with most people seem to be noticing the stirrings of inflation in society i mean
you might have noticed it too it's showing up in commodity prices lumber prices and food obviously
in financial assets and it'll show up in consumer prices generally soon but so that would be one
way for bitcoin to basically become irrelevant because it's a you know it's a dialectical thing
bitcoin is held in opposition to the established monetary regime so if they completely reform
themselves and you know the dollar becomes super sound once again and the fed stops tinkering the
way they constantly do then uh then we wouldn't need cryptocurrency as much the other thing would be
if a completely superior design for a new sort of state independent monetary system emerged
but it's really hard to even imagine how that would come to emerge and there's good reasons
to think that bitcoin uh the conditions of its launch were extremely favorable and hard to replicate
can you speak to some of those conditions why it's a unique uh timing wise uh moment for bitcoin
to emerge yeah so obviously bitcoin was born in the depths of the financial crisis which gives it a
nice nice historical element but that was kind of a coincidence honestly we know that satoshi
had been working on it earlier in back or in 2017 um the really special thing about bitcoin
was that it was launched anonymously by an entity that did not seek any glory or credit for what they
did and apparently never monetized it at all so they never really moved any of their coins
satoshi sent one test transaction to uh halfini who's one of the earliest bitcoiners
aside from that as far as we know satoshi never spent any of their coins so you have this wonderful
promethean quality whereby it's almost self-sacrificial i mean it's like this borderline godlike figure in
terms of their restraint finds this monetary technology and releases it to the world and pays
the price they never took advantage of their filthy lucre you know they never they never recognize
any of the 50 billion dollars that they made from bitcoin right uh and satoshi also didn't
assign themselves any privileged access uh to the coins you know satoshi could have just written in
the code i own 10 percent of the coins but they didn't they just mined in the open free market
competition like everyone else it's just that satoshi is an early miner to support the network
accumulate a lot of coins for sure but they didn't have any privileged special access so that's one
thing that's extremely special about the launch is that we had a founder that was truly committed to
the monetary protocol and didn't seek either recognition or financial spoils and then also
left you know if satoshi left in 2010 2011 and hasn't really been heard from since it's a very
george washington move gangster move where he didn't want power and once he got power he let go
of it precisely that was the key actually move what one that was that was probably one of the
most important moves at the founding of this country that's right george washington could
have been a king uh probably if he'd wanted and satoshi could have been uh jerome powell if he'd
wanted and satoshi could have held on to power indefinitely but chose to leave the other thing
is that bitcoin circulated for a long period of time from january 2009 to about july 2010 without
really having a financial value so there weren't really any marketplaces it didn't have a value
and so that gave it this really great distribution you know among a broad set of stakeholders
and there were no venture funds or hedge funds you know trying to aggressively buy up all the
supply back then now when you have new cryptocurrencies launched they're like aggressively pre-mined and
some gigantic silicon valley venture fund is going to own 30 of it and so it's sort of impossible
to conceive of how that could become a global money because how could you know a silicon valley
investment firm own 30 of the money supply that doesn't make sense that's just so
oligarchical right it's unbelievable so bitcoin by contracts is a very bottom up thing it was
the early enthusiasts uh people that were you know really um excited about the technology
they're the ones that obtained those early coins and so there was a real element of fairness and
just an organic nature to its launch which would be incredibly hard to recapture today let's say
satoshi came back and they said okay i made bitcoin 2.0 i'm gonna release it there'd be the
most aggressive land grab ever by you know gigantic pools of capital to sort of get favorable
allocations of the new system right can satoshi with bitcoin 2.0 build in a resistance mechanism
or a prevention mechanism for the land grab it would be hard to because you know if you have
capital and resources i mean if it was a proof of work chain you'd just have people that would
invest a ton of money in mining for instance but most new blockchain cryptocurrencies are just
sold basically they're you know issued in token offerings kind of thing so so it's hard to enforce
through the protocol the decentralization of control yeah our it'd be challenging to and people
have tried to do airdrops you know where they you know distribute coins a large number of people
basically doesn't work most people don't care about the airdrop so it's hard to have an equitable
distribution i think the conditions of bitcoin's launch were so lucky and favorable that they're
very unlikely to be replicated so i do think it's going to be real challenge to ever have a new
competitor that's as decentralized as leaderless as dispersed sort of distributed as bitcoin is
has its credibility i don't know how you could overrule it on those important features what about
bitcoin's comparison to other current cryptocurrency so bitcoin versus ethereum for example why is it
possible that ethereum overtakes bitcoin that's certainly possible yeah i'm not ruling it out
ethereum leadership is sort of wise enough to understand that they shouldn't compete with bitcoin
on those most profound qualities like ethereum doesn't really aspire to be more sound from
a monetary perspective than bitcoin right the in fact the ethereum leadership are sort of
constantly tweaking the monetary policy so they went for a completely different trade-off right
they also don't compete to be as decentralized from a governance perspective right because
there's leadership there's an eth foundation there's a charismatic leader of italic and ethereum
has this policy of hard forks so in bitcoin hard forks are extremely rare in ethereum that it's
the default way to change things so it's a much more adaptive system and it changes more frequently
but that also means that it's sort of they're incurring more risk when they
introduce those changes there's much more complexity so ethereum is smart because
they sort of understood bitcoin as the top dog when it comes to a sound money a digital gold type
thing and they went for all of the different trade-offs they wanted to be more of a platform
they wanted to have more complexity the transactional layer they wanted to take on more risk in terms
of changing the protocol they wanted to change more quickly they wanted to make the monetary
policy more mutable so ethereum takes that completely different tack of course you know
not ruling out that it could take over bitcoin from a market cap perspective it's just a very
different system and i tend to think the bitcoin is the most disruptive one because it's the most
equipped to challenge sovereign currencies in the grand scheme do you think they can coexist
so like in the future is do you see a world where you know ethereum captures some large
percent of the market and but nevertheless the minority a hundred percent a hundred percent
bitcoin has already been tokenized and put onto ethereum many units of bitcoin i think over a
billion dollars worth so none of them do they coexist they are actually mutualistic so they're
like two creatures that have this you know it's like the the rhino and like the bird that pecks
the parasites off the rhino's back or whatever yeah right so i don't know which is which in the
analogy but yeah i don't know who the parasites are or you know the alligator and the teeth
cleaning fish or whatever right so you know i always wonder why the alligator doesn't just
eat the fish but uh i guess they're brushing its teeth basically so ethereum is it gives you more
transactional flexibility there's much more experimentation happening there it has this
whole decentralized finance element there's a huge number of bitcoins that circulate on the
ethereum protocol right because ethereum is open to other asset types basically so i think that's
actually a creative to both systems because ethereum gets to have this good form of collateral
bitcoin on the system which is good volatility characteristics and then it's a supply sink
for bitcoins which are sort of now they're injected into this third party protocol and that
i think reduces the velocity of bitcoin over on it's probably good for the valuation so you see
it's it quite possible it could be a symbiotic relationship that's really interesting i think
so i think so uh what are your thoughts about uh vitalik buterin what are your thoughts about some
of the other figures in the space outside of bitcoin i think vitalik made some mistakes with
ethereum ultimately like i disagree with some of the decisions that were made along the way like
there's this infamous case of this bailout where 14 percent of ether was lost in the smart contract
or really the this smart contract that a lot of ethereum leadership were sort of backing and
supporting was hacked and then the foundation with vitalik support chose to make a change to the
underlying protocol to undo the hack right so to me that was not the most prudent approach
because you're basically violating the core protocol rules in order to undo you know to
bail out a specific contract which has failed granted there was a lot of ether in there but
i think that shook the credibility of the the ethereum system that happened back in 2016 i think
uh that was one reason why i i became disenchanted with ethereum so basically even if in that case
that might fix an important problem that opens the door to centralized like uh manipulation of
the protocol in the future yeah it basically demonstrates that there's certain elites at
the protocol level that can exercise specific control over the system and you know a lot of
people have lost money and hacks on ethereum and a lot of contracts have gone south huge amount of
value uh but they didn't get a bailout and it was just when you know this specific contract
called the dao dao uh was hacked that you know the leadership intervened and you know to their
credit they haven't had a significant intervention or bailout since then but it did normalize the
practice and i think it weakened the social contract so i would prefer that you sort of
bite the bullet in that situation and you accept the failure of that contract there'll be a ballsy
move to bite that bullet yeah i mean and then you would have had like what they thought was a
malicious entity and control of a lot of coins i think the real reason they sort of felt that they
had to undo it was because they'd always planned to move to this proof of stake world
where your political control over the system is a function of your wealth in the system
and they didn't want this attacker which would have inherited all this significant wealth
to have influence over that future proof of stake version that's sort of my theory
yeah i mean that makes sense this it kind of reminds me of the bailout of car companies
you know this this is difficult there's a lot of people that criticize the bailout of these
large companies you know but creative destruction i mean i i was critical of the bailouts that
happened during covid i mean i generally think that it's healthier for society for bad firms
that aren't making money to fail or be reorganized under the various you know forms of bankruptcy
and you saw what happens you see the you know the corporate sector in japan in the 90s there's
this like slow motion insolvency where basically firms weren't allowed to fail and the japanese
corporate sector lost competitiveness because bad firms did not fail and so you know the process
of actual capitalism for the market clearing didn't occur so i'm always in support of you
know of the free market being allowed to clear for non-profitable firms to fail it's complicated man
because uh creative destruction seems to be in the long term a positive but human civilization is
such that short-term pain has real impact on people you know yeah policy makers don't ever
want to incur that short-term pain because they have a short-term outlook and term limits often
so but and also just it's short-term pain forget policy makers forget politicians it sucks to lose
a job for an individual you know you could say the company you know created destruction of a company
means the company was inefficient and that's going to have a ripple effect of teaching everybody
else what an efficient operation looks like but like there's jobs that are being lost there's
families that have to suffer because of that i mean that's a tension we live in society is
having a basic safety net for our world because there's a level beyond which like if through
creative destruction that you have some percent of the population that dips below a certain level
that you would call like suffering we don't want that and that's a difficult thing to live with
like yes in the long term you want inefficiency to be destroyed and efficiency to be rewarded
but there there does seem to be a base level of like quality of life that we want to uphold
that's a difficult thing to think about i think about that a lot there's a doctor called paul farmer
that you know there's like a in Haiti or in Africa there's a child who's dying and as a doctor
you want to give everything you have all the money you have to save that one child
but there you know and you do actually but that's a that's a very human action
it's not an economic it's not a it's not a rational action from a game
theoretic perspective because there's no way you can take that action for every child who is suffering
but there's something deeply human about doing that for that one particular child
in that same sense creative destruction is an economic principle but it's not
it's not necessarily that same kind of human principle and there's a tension there
I see it I mean I think that's the that's the issue with modern central banking really is that
the central bank always has an incentive to lower interest rates and they've been doing that from
the 70s towards today on this you know well 80s really on the slow march down because whenever
there was a hint of a crisis in the economy or financial asset prices started to fall
their reaction is okay well inject more capital into the economy we'll save it
but I my view is that these palliative short-term measures caused the build-up of a huge amount
of fragility in the long term and then the ultimate collapse is much worse than the counter
factual situation where you raised interest rates you you know you took your medicine
and the economy was healthier so and that's sort of that's why you know people like Ray Dahlia
point out that you have these long-term debt cycles and we're sort of at the end of one now
is because we couldn't take our medicine we couldn't you know let interest rates clear
we constantly wanted to ward off any you know difficulty and we didn't ever want to
deleverage truly and then when the when the debt crisis happens and it hits it's you know horrendously
bad so do you think bitcoin might reach a million dollars in value it's uh it's having a current
resurgence a crazy one in 2021 in the recent months of over 60 000 i guess it is now do you
think it's possible it goes over 100 000 do you think it's possible it goes to a million
you can't rule anything out with bitcoin so i mean i'm not you know wanted to put price targets on it but
one way it could reach a million dollars is bitcoin's value stays unchanged in real terms
and dollar and precious dollar depreciates against it um not that i expect hyperinflation but yeah i
mean like bitcoin is worth about one tenth uh slightly under one tenth the value of all the
gold in the world and uh you know gold is worth 10 trillion 11 trillion dollars in the aggregate
do i think bitcoin can be more culturally and economically salient than gold in two decades
time 100 percent bitcoin was unknown 12 years ago and today 100 million people worldwide own
bitcoin so just extrapolate that what is the level of penetration you think we'll get 500 million
500 million a billion you know you can easily tune these adoption curves however you like i i don't
think it's done you know monetizing and being adopted globally do you think it become it can
become like the base layer for a lot of our financial operation like to become the main
base layer for all our transactions so like even even banks will use bitcoin essentially and like
visa would use bitcoin as the base layer like it would actually operate on very similarly at the
at the surface layer but at the base there would all be bitcoin that's precisely what i expect
and banks and visa are already using bitcoin so visa has embraced bitcoin in a really big way
actually and it's always funny to the people saying bitcoin has to change in a certain way
so it can compete with visa no visa adopted bitcoin right paypal adopted bitcoin square
adopted bitcoin obviously they're not tearing out all of their existing infrastructure but
they're totally engaging with this thing banks have now begun they got the green light to provide
custody for bitcoin for their depositors that's the first step eventually like you know it'll
have in one of two ways either bitcoin native financial institutions will become banks that's
already happening there's bitcoin exchanges that have gotten banking licenses or banks themselves
will start to engage with bitcoin as a reserve asset it'll converge either way that's totally
happening uh and yes i mean i don't think bitcoin is going to power every financial
transaction i think it'll coexist alongside sovereign currencies but i think it's a great
reserve asset it's a very powerful asset to build a financial system on top of because
it's highly highly auditable um it's something that you can take physical delivery of very cheaply
and those are great qualities if you're a depositor in a bank they can prove to you how
much bitcoin they have they can't really easily prove you know in the old system how much gold
they held on deposit and you can easily conduct a run on the bank you can hold them accountable
because you can withdraw it um because you know making bitcoin transaction is pretty easy at the
end of the day unlike fiat currency it's like kind of you can't really withdraw all your dollars from
the bank i mean you sort of can but you're not going to want to take delivery of pounds of cash or
anything like that so it's a good modern asset upon which to build a financial system basically
you you mentioned square and visa sort of investing in bitcoin what do you make of probably
one of the higher profile big investments in bitcoin which is tesla and ilan musk but there's
also a few billionaires like chimoth and all them investing what do you make of this whole
movement why do you think they're doing it i mean tesla is an interesting case why do you think tesla
is putting uh buying so much bitcoin i honestly don't know and i would love to truly know ilan's
genuine thoughts on bitcoin um because he's kind of sending us mixed messages honestly
with his embrace of dogecoin which is sort of playful not exactly sure what point he's trying
to make there so you were involved with dogecoin you mentioned offline a little bit in like in
the early days or at least like uh played around with it what do you make of dogecoin what do you
know that what do you make of dogecoin what do you make of ilan and doge what do you make of this
particular meme coin is it is it one like a legitimate cryptocurrency or is it two like
a funny internet way of saying fu to the man yeah it's it's a good question i mean so i wasn't like
a figurehead in dogecoin or anything but that was totally my introduction to crypto was mining
dogecoin in my dorm room and then tipping people online in dogecoin which i just thought was the
funniest thing so i guess i was really easy to entertain back in 2013 but it was very playful
at the time there was a culture around dogecoin and the people liked it because it was in opposition
to the bitcoin culture which was really serious and involved lots of austrian economics and roth
barred and hayek and stuff like that so that was my introduction to cryptocurrency was because i
thought the bitcoin people were pretty lame yeah and they were like way too serious about all this
stuff and i was like okay i'll just be a part of the dogecoin community and they did all these funny
publicity stunts like they paid to send the jamaican bobsled team to the olympics you know like
great stuff like they put the dogecoin logo on top of a nascar car yeah um and i just that tickled
me so much because it's like this made up internet coin this was back when crypto was pretty novel
and still like kind of funny and stuff and that was really entertaining fast forward seven eight
years dogecoin is way less entertaining now frankly because it's the leadership left the community
spirit evaporated um the meme didn't persist i mean doge itself is not really a contemporary meme
right i mean it's an old meme although that new refresh of the meme like doge haven't heard that
name in a long time like or doge is like in a hat smoking a cigarette i mean there's some
sense where elon is reinvigorating the meme and it's funny because like one influential figure could
do just that which just speaks to the tension that you're talking about like tessa is investing
bitcoin and yet elon he also tweets about bitcoin but yeah he's i mean who am i to question the
meme right like yeah i i can't you know dissect internet culture and pedantically sit here and
tell you it's an invalid meme yeah you know if if people believe in it then it's real it is there
a space for meme coins at this at this time like like doge or somebody somebody else to almost like
um you know there's it does serve a lot of purposes which is like you said it pulls in people
into this whole space of digital currency and digital in uh and to cryptocurrency allow them
to explore allow them to have fun as opposed to taking everything very seriously is there still
space for that yeah yeah and i mean the crypto landscape is very broad today so whatever you
know cultural element you seek to find within crypto you will find it was a bit different in
2013 because bitcoin was kind of the only game in town there were a couple altcoins and so dogecoin
made a lot of sense as a counterpart to bitcoin as a less serious counterpart today crypto is just
this like gigantic cultural and economic trend so it's you know very multifaceted dogecoin is one
of the many you know ways that people have to engage with it i think a lot of people that buy
dogecoin based on elons implied to guidance are going to lose money because fundamentally there's
nothing enduring about dogecoin it's an ancient fork of bitcoin it's unmaintained there you know
it's probably at risk actually from a protocol perspective it's merge mined with litecoin i
think if there was an inflation bug on dogecoin it's unclear who would sort of be able to remediate
that you know so it's not technologically very sound so i wouldn't recommend that anyone stores
wealth in it you know yes it's funny because cryptocurrency like my interest in cryptocurrency
is in the exploration of technical ideas but cryptocurrency is also like in the case of dogecoin
like for laws at least originally like a meme coin but it's also a mechanism for investment
and so those are sometimes a tension and it's unclear sort of like yeah you know there's the
meme where doge has almost become to take it to i guess to a dollar trying to drive the price of the
value up to a dollar but you know implied in that is like this overlap of the meme coin and like
legitimate investment and so you have a lot of young people i think who almost start getting greedy
and want to make money like as opposed to having fun and that becomes a different beast then because
you're essentially making financial decisions that can have a long lasting like you know money is
freedom and if you make stupid financial decisions you can remove freedom from your life and that's
it can be detrimental in that sense so i don't uh it's difficult i don't know what to do with that
with that set of ideas because a lot of crypto currency including bitcoin is very volatile
because it's new so you're trying to figure out the space of like what's actually going to be
a large part of like you speak of network effects like what's going to take over the world and through
that process there's going to be a lot of volatility and if you're talking about cryptocurrency as a
investment mechanism then it can have a real detrimental effects on people's lives
yeah and that's really the challenge with operating in the crypto space talking about it
overlaid on top of everything that's interesting politically or culturally about it
is the financial incentive yeah and so you know it's not all fun and games because there are
literally billions over a trillion dollars at stake now so if you buy dogecoin because some
influencer on tiktok said so yeah you've now made a financial decision right so i'm not going to
scold any dogecoin buyers or any crypto asset buyer for that matter but be aware that there are
like billions of dollars of really elite hedge funds that are trying to front run all of your
decisions and evaluate social sentiment things like that so it's a waterfall of sharks basically
and by the way if you're listening to this uh don't take this podcast or anything i ever say
is financial advice that's definitely not my interest or expertise level now the the interest
here is to explore different ideas speaking of which you've written a little bit about nfts i'd be
interested to hear your opinions on this space of ideas these non fungible tokens they seem to have
a cultural impact currently but do they have a long lasting technical financial or cultural
impact or is this just a fad what what do you think of nfts yeah i think the current enthusiasm
for nfts and the financial metrics you see the growth there in that sector is partially a function
of where we are in the actual credit cycle so oftentimes when inflationary events occur you
have correspondence speculative manias that occur at the same time because people intuitively feel
that the fiat currency that they hold is being debased and so they frantically look around for
other places to put it so stocks property commodities and then other asset classes
nfts or an asset class and this is a case with any inflation you look at in history
you saw these correspondence speculative manias basically speculative episodes so a lot of us
feel that inflation is occurring whether it's in cpi or not that basically lots of dollars
are being injected into the economy we've all seen stocks massively appreciate even as GDP
contracted and so a lot of people sort of got caught on to this notion that wow is the fed
you know lower his interest rates and congress spends a huge amount of stimulus dollars into
the economy financial assets going to go up so i better have exposure to all that stuff
and so you see virtually every asset class is awash with cash right now people are
investing like their lives depend on it investing trading whatever whether it's options volumes
on robin hood you know like kind of retail brokerages things like that whether it's stocks
whether it's crypto and then other collectibles baseball cards their valuations have been skyrocketing
and so i think nfts are part of that it's a new asset class it's basically an opportunity to invest
in sort of art or collectibles in game items things like that i think that explains a large
degree of the enthusiasm the excitement is that it's a novel asset class that people can trade
and write as you know these inflationary tailwinds pick up now as for the sort of virtues of the
actual technical phenomenon nfts are actually not a new idea at all so you've had nfts i didn't
call them nfts but in 2016 built on bitcoin for instance so it's been around for a while
well what it is is a serial code basically a string of data that is inserted onto a public
blockchain and then circulates as a unique token and then the question is okay well what does that
data refer to what's the external reference and that has to be defined there has to be some entity
which says oh yeah this unique string refers to like this piece of art or digital content or
you know trading card or whatever so nft the concept itself is like an incredibly broad idea
it's just well what if we took you know barcodes and put them on chain so that they could be traded
and so they could circulate freely on a peer-to-peer basis and plugged into exchanges and things like
that so that concept is super valid clearly has protocol market fit right people are using it
for a really wide array of purposes it's completely going to exist may the valuations contract
of nfts in the aggregate definitely possible probably likely but i think the notion of
creating enduring collectibles or artworks that have accompanying you know accompanying
signatures basically autographed art on the blockchain that has totally been validated
i think that won't go away i wonder if there's ideas like big clout for example i don't know if
you saw that if there's ideas built on top of this concept doesn't have to be like ethereum
nft it could be just the concept of non-fungible tokens whether those kinds of things could take
hold and they it's less about financial transactions and more about almost like
uh i don't i don't know how to put it but like staking identity in some way whether it's big
cloud or identity of objects like there might be some way of connecting physical reality and
digital reality some interesting ways so just the financial aspect is a way to like put some
validity behind the identity i don't i wonder if there's like ideas there that are yet to be
discovered or ideas that yet to be take hold like big clout seems interesting yeah seems
shady as hell seems a little scammy yeah i don't know if i like the idea that you can bet on people
essentially right yeah i think my market cap on big cloud is like 90 000 and i haven't done anything
there so did you take did you like take like verify yourself or whatever i have not i think
people would yell at me on twitter if i did so and it's unclear whether it's a scam yet or not
right it's unclear where it's coming from well there are some details about the you know investors
it's it's backed by some pretty big name investors so i probably wouldn't use the word scam to
describe it but it's got Ponzi like dynamics like everything in crypto yeah so there's very
questionable and then also is that using using people's likeness without their permission which
is i think a legal question you know so there's open questions around it but you know is our public
blockchains and you know that sort of architecture is that going to be useful for decentralized or
alternative forms of social media yeah a hundredth percent yes you know i'm super super bullish on
that idea basically creating open protocols uh open name spaces ways to organize without the
dependence on a single node effectively in silicon valley you know the twitter node or the facebook
node um i think it's a matter of urgency that we create you know digital gathering spaces where
you have strong property rights you know you have a claim on your identity you have a claim on your
data uh and open architectures are a way to do that i don't know if it'll be a blockchain
but i certainly i think the the general you know concept introduced by blockchains
is a good template for how to you know organize these systems yeah value freedom value decentralization
of power whatever the mechanism uh let me ask you about love so uh there is a bitcoin maximalist
community that uh sometimes so those folks in general have a strong belief that bitcoin is
good for the world and it's almost an ethical imperative to to sort of help bitcoin succeed
which i think is uh as a member of any community i think is beautiful to believe in the vision of
the community right there does seem to be some properties of uh what some may call like toxicity
or derision and mockery and those kinds of things um so you know uh some folks have criticized this
right that uh bitcoin maximalism is not necessarily good for the world even if bitcoin
is good for the world what are your thoughts about this kind of approach philosophically
or practically to uh the spread of bitcoin and is there a way that we can add more love to the world
while we add more bitcoin to the world that's a great question i mean i you know bitcoin is
sort of what you make of it so you can define your own path as you advocate for bitcoin or
don't for that matter so my chosen approach is the approach you see here which i try to minimize
the amount of sort of harshness or mockery although i've been known to be mean on twitter too
you know what twitter is a specific site to interrupt is a specific media where this takes
it's the worst form so i'm learning listen i'm actually because of this podcast but in general
i'm part of different communities and some are full of like unabashed love and some are like
when i experienced on twitter the bitcoin community at first i was off put yeah in terms of the
intensity the mockery i bet the layers of lull like the layers of not taking anything seriously
and i think there's power to that there's freedom to that i appreciate it i have respect for it
but it's not my thing on twitter it's just not not the way i enjoy communicating on twitter
i retired from twitter i hit i hit 100 000 followers and then i retired so i'm free now i don't have
to tweet anymore it's great but i i totally can see the point i wish that bitcoiners were gentler
in their approach not all bitcoiners are like that of course there's you know 50 to 100 million
of them worldwide and a few tens of thousands on twitter so i'm not going to claim that they're
necessarily representative the toxicity though is kind of a learned habit because
bitcoin has had so many episodes where strong willed institutions the dice billionaires the
dice were pretty toxic you could say right i'm basically mocking critics of bitcoin
but at the same time you're saying that the criticism has been predictable and repeatable
and all it's been the same throughout yeah and that's a that's a pretty you know dismissive
thing to say right that i can reduce you to a an algorithm of you know with 11
11 permutations um but you know the thing to remember i guess is that some of the best
funded companies in the bitcoin space the most powerful miners billionaires have tried to change
and co-opt and alter bitcoin um to shape it to their liking and without these incredibly hard
core sort of high priests of the bitcoin protocol it would have been hopeless hopelessly malleated
in all number of ways and so there is a reason why someone would be incredibly protective of bitcoin
uh does that justify immense toxicity you know on social media probably not
but it's a leaderless uh protocol so the whole point is that it's money for enemies
and you know some of the bitcoin maximalists came for me too when i made suggestions that they
didn't like um but you know i'm happy to use it the protocol because i know that that transaction
will be final regardless of how odious my counterparty is or how how you know politically
disfavored their opinions are see i i mean and this is where there's this there could be disagreements
but i i think you have to think about what's effective as a defense mechanism of strong ideas
and i personally think uh that uh like kindness and thoughtfulness and like it is much more
effective because it lets the idea shine as opposed to the personality of the individual humans
overriding it but there's debates on this you know i i mean i take your side on that
i think a patient and careful approach is the way to go now do all critics deserve good faith
engagement right no i would say a lot of critics of bitcoin operate in extreme bad faith and the
reason why is because we're not just talking about technical questions in fact most of this
conversation is not been technical it's been political because bitcoin is an intensely
political idea and so a lot of people are predisposed to totally hate it and to wish you know death on
bitcoiners i mean there's a professor at gw this i saw earlier this week that was musing about
getting all the bit corners on a boat and singing it it's like in what other context would a you
know upstanding professor muse about mass murder but in the context of bitcoin it's sort of okay
um you know within his peers because you're talking about something that most people don't like
you know it's a concept that's alien to them that doesn't jive with the way they see the world
and so because it's so you know pitched from a political perspective there's a lot of critics
as well as defenders that operate in bad faith i would say but that's the nature of the beast
it's because we're proposing a very disruptive thing and there are people that would be disrupted by it
you wrote a blog post titled on writing you're i think an excellent writer
so let me ask what does it take to be a good writer what does it take to
write some of the blog posts you've written sort of condensed set of ideas in your head
the mess that's probably in your head and putting down on paper in a way that's uh
communicates the idea clearly and powerfully so that was basically the point of the blog post is
that being an impressive writer is different from being an effective writer you know so
i think the answer to your question is humility basically so uh i think if you let pride and
vanity seep into your writing then you risk uh creating a very noisy signal you know creating
a very inefficient channel for communicating literal neural arrangements from your brain to
someone else's brain and that's what i think about when i write it's like wow i have the power to
at scale change the literal physical composition of people's brains right to rewire them yeah
if i make an idea that's so persuasive that's so sticky if i coin a phrase that is so pithy
then i can alter their brain that's crazy i mean you're letting someone reach into your
head and like mess with it a little bit that's unbelievable and that's like a superpower and
if you could do that to a hundred thousand people at once how powerful is that right
and you mentioned to cart i think therefore i am that's like literally rewired millions of
brains throughout history right i mean that's one of the most powerful like kogodo urgo sum
one of the most powerful phrases ever written and that sent a zillion philosophy undergraduates
on a rabbit hole of skepticism that some of them didn't make it out of you know and they're convinced
that you know with the brain in the vat theory is true and there's no way to know you know what
are tangible experiences but yeah that so that's the beauty of writing and the thing that interferes
with that is our pride our desire to you know impress people and you know look good to them and
show off our our vocab and stuff and that's that was the point of that piece is that i went on this
journey where i eventually realized that i don't know if i'm any better of a writer for having
realized it but i think that is a necessary condition so does that mean there's a value
to striving for simplicity in the words as opposed to i mean complexity i think so for
sure and we deal with complex topics all the time in crypto and that's always a huge red flag for me
i mean if you can't explain something simply do you understand it you know yeah so if you're
talking about something complex if you can't find simple ways to discuss it my presumption is that
you're actually obfuscating the truth and this is what Orwell railed against with political language
you know he really hated political language because he felt that its authors were using deliberate
obfuscation and you know he hated euphemisms and i hate euphemisms too you know i i much prefer
you know forthrightness and clarity of thought but most people when they write don't really endeavor
to be particularly clear they might be writing to show off their startup or you know to demonstrate
to people how cool they are or how well read they are you know they're displaying it's like a peacock
style display what fraction of people right to actually communicate meaning small fraction
it's especially difficult because what i've detected is something in us humans as readers
assign more credibility to people that obfuscate so like simple clear communication of an idea
is not like the immediate reaction is not one where we assign credibility to the person like
like that was brilliant there's a lot of people that i kind of listen to without really understanding
what the heck they're talking about and but it sounds musical and smart and then i see a lot of
folks assigning credibility to that person and it's unfortunate it's unfortunate that there's
that tension as a reader that we appreciate the beauty and power of like complex weaving of words
without assigning as much value to like actual clear communication of an idea and i'm always
skeptical in speech as well when someone will describe someone as articulate i'm always immediately
immediately skeptical of the value of what that person is saying because if you articulate you
can make bad ideas sound very acceptable and great and norm chavsky has said this before
as a way to defend the way he speaks he said that like he's suspicious of charismatic people
because they can basically sell any kind of idea he speaks in a very monotone and boring way
so that whatever the value his ideas have they'll shine through there's something to that there's
something to that but it's a difficult journey it's a difficult path because then i think it's
the right path because ultimately you focus on the quality of your ideas and in the long term that
wins i agree just by way of advice is there if people are interested in bitcoin or cryptocurrency
in your work what are good books or resources on bitcoin from you and from others that you can
recommend that were in your own journey helped you or you've seen help others well it's very easy
i mean it's much easier today to make the bitcoin journey because the quality of content is so much
better than it was when i started i mean when i learned about bitcoin there was the bitcoin wiki
and the bitcoin stack exchange and the subreddit and that was kind of it and you had to just pick
up everything and the economic theory hadn't really been worked out very much so you had to pick
everything up from scratch the good news is that there's a huge abundance of content and that's
actually one of bitcoin's greatest strengths is that people are totally inspired to write about it
and it's almost a rite of passage at this point if you're like a bitcoin thinker to have your book
i don't have a book yet i would love to recommend my book i haven't written one
so you think about writing a book yeah i think it's my duty 100% everyone that has
created a lot of bitcoin content probably should condense it into a book to give it an enduring
status it's interesting because you mentioned uh block size wars and you've written on a lot
of different topics so you could both write a like a big like sapien style book about bitcoin
or cryptocurrency right but you can also write a book on each like a specific thing and now that
you put pressure on yourself and talk talk about simplicity right where do you lean on those different
book journeys that you might take on like do you have in you uh eventually like a like a bitcoin
book i mean i tallied up the words that i wrote in the last couple years on bitcoin it's like
over a hundred thousand words a year so that's two novels there um but yeah i think i do i think
there's so much underexplored space in bitcoin i mean uh a systematic interpretation of satoshi's
writings for instance and a lot of people don't want anyone to do that because they don't want
it to have these religious overtones where you're engaging in interpretation you know but
that's you know something that should be done there's a lot of bitcoin histories that haven't
been written there was a great bitcoin history recently published that's this is one of my
recommendations is on the block size war by uh jonathan beer uh who runs probably the best
research desk in the industry um so there's huge amounts of history that has transpired
that hasn't been chronicled and some of the accounts are indifferent you know they're
often written by outsiders you know journalists that maybe don't fully engage with the bitcoin
system but if you think the humans are interesting in the story too of course they're the most
interesting thing you know i mean bitcoin itself doesn't really change that much it's kind of this
cold you know protocol that just sort of takes along but the characters are just fascinating
i mean and there's so many unbelievable characters in the bitcoin story unbelievable yeah that's
the cool thing about bitcoin and cryptocurrency and just internet is like the weirdos the brilliant
weirdos like all the people in uh in the stuff that's already established are boring like economics
professors are all boring right but the interesting people the wild ones are are the ones that are
innovating on in the crypto space which uh is you know that's where the dangerous weirdos are
and the exciting brilliant weirdos well you had to be kind of crazy to adopt bitcoin and in the
first sort of five years of its life so there's an adverse selection element there i don't know if
that's an uncharitable way to put it but like some of bitcoin's earliest evangelists are not the
evangelists i would have chosen but they were the ones that we got so it's the one we got but is there
is there resources you're basically saying just throw a dart and most books are going to be good
or is there something that stands out to you i mean your average book is you know terrible for sure
but uh not on bitcoin specifically but just in general um it depends whether you like the computer
science the economics or the history but my recommendations would be you know obviously the
bitcoin white paper that's uh and satoshi's uh complementary writings that's very important
is to try and understand the intentions behind the system and also to understand the system
without having your view colored by some third party's description of it most descriptions of
bitcoin are really bad uh so the just go to the originals go to the howlfinney's posts
satoshi's posts on bitcoin talk there's a huge amount of lucidity there and actually most of our
questions about bitcoin today that we have a decade later were really answered in those earliest days
people just don't know it the canonical economic work relating to bitcoin a lot of people don't
like it i think it's fine would be uh the bitcoin standard a lot of people don't like it i just read
it it's good i like it i think it's it's a good uh description of sort of the austrian perspective
and then how it relates to bitcoin there isn't that much about bitcoin in there but i think the
point is once you've understood you know safedin's view of monetary policy bitcoin makes a ton of
sense you know i actually need to argue for it that much so the bitcoin standard is a good introduction
to sort of the orthodox thought in bitcoin um there's a more recent book called layered money
which i liked um by nick batia which goes into more depth about what i was talking about earlier
in the conversation the layered approach to scaling and that's a really critical thing to
understand then technical books about bitcoin i like grokking bitcoin uh which is a very computer
science heavy one there's a good textbook um called bitcoin and cryptocurrency technologies
by arvin noranian i think he's a prinston computer science professor which is really
good at building intuition um antinopoulos's books mastering bitcoin are good then there's like
simpler intuition building books that aren't hardcore on the economics or the protocol design
so you have like inventing bitcoin by yon pritzker which is good you have bitcoin clarity by qr
bikers as you can tell i have like a my bookshelf is like mostly bitcoin books okay well that's a
good selection and of course like you said you're you're writing and your book that comes out this
year or next year next year i think i'm gonna need 18 months okay uh but you know they're
most of the good bitcoin content is just online on medium on twitter so um it's it's a decentralized
you know consensus kind of thing what about the book recommendations that you could give people
love these outside of the world of uh crypto that maybe had an impact on your life fiction
like sci-fi maybe technical philosophical is there something you would recommend that people might
read i really liked the three-body problem but that's a really hackneyed recommendation
but it really made me think and i like the hard sci-fi you know the commitment to science and
science fiction so i thought it was very clever is there one uh is there something that really
annoys you in terms of the opposite of hard sci-fi like that doesn't get stuff right movies or
i mean i have issues when i watch like ostensibly sci-fi or fantasy films that are not consistent
about this the rules for the universe that they've laid out or where there's an impossible to
comprehend like um uh christopher no one's latest film oh yeah you needed like a spreadsheet
to understand that tenet yeah i trust that maybe he was consistent about the rules of his universe
i just did not understand it yeah at all in that sense i i really probably one of my favorites is
2001 space odyssey is it's so obviously it's many decades ago but it's quite brilliant in both its
consistency and the depth of thought put into like what the technology would actually be
not in like visually not in kind of silly graphical ways but in um in terms of function
and its impact on humanity so right but that takes care that takes that takes a lot of work
that takes genius actually which is why cubrick is regarded for what he is
what advice you've taken an interesting journey through your life uh you've you were at fidelity
your philosophy major uh you're now uh one of the seminal minds in the world of bitcoin and
cryptocurrency who the hell knows what the next five ten years looks for you if you were to give
advice to somebody uh young today uh you know making their way through life making a career
what would you uh what kind of advice would you give see the problem with advice is that
in a world where so much of success is defined by luck and serendipity is that the advice givers
often don't know why they've been successful right and so they might say you know i was wearing a
green tie on the day of my job interview and so you should go out and wear green ties and so
they might just get the causality completely wrong right i mean i'm not gonna claim that i'm
super successful yet but um see that's the problem is that i don't think my journey is
replicable necessarily so um you know who am i to give advice although the one thing i will say is
that the thing i did right was to become completely obsessed with um a domain i found really interesting
and held promise like if i had been really interested in like magic the gathering i wouldn't
have been able to like do much with that aside from build like a killer you know card pack or whatever
um and i wasn't afraid to you know really put myself out there um and you know float my thoughts
online and see how people reacted to them even if i said stuff that was completely erroneous or wrong
all the time the rewards to writing and just publishing content are immense as you know
obviously it's the most high leverage activity i think most young people have available to them
um and i was very lucky and i benefited from a lot of favorable coincidences a lot of people
that took a chance on me um and if i had more time i would sit here and name them but uh
is there something you in your actions that made you more open to the uh the benefits of luck
sort of uh you know luck can bring you a lot of positive and negative things
so saying you're lucky means you are able to ride the wave of whatever positive stuff luck
bring brought you well that's right you have to put yourself in a position to be lucky and most
people don't so you just have to get as many shots on goal as possible and of course luck
is plays an undeniable role in any career path for sure but you do have to make yourself available
to it um and you have to take a ton of chances um but yeah that's the problem with advice
it's just so hard to replicate it so i i find it illegitimate most of the time
you heard it here kids don't listen to anything nigg just said exactly wear green
tie to your interviews it'll work out well uh do you think there's a meaning of reason to any of
this this existence this life well we we make our own meaning for sure uh i find a huge amount of
meaning in what i do um i find it beautiful i feel very lucky and blessed to be in the line of work
that i'm in uh you know to have your hobby and your passion and your job just be a completely
integrated thing so that's where i find meaning but you're just a bag of like cells and bacteria
that eventually dissipates dies and it goes into the ground and disappears back into the universe
i mean that doesn't make any sense well that may be true but uh i find the sublime
in things like bitcoin i find it incredibly inspiring to work on it i believe it's a hundred
year plus project and uh you know it stirs those aesthetic emotions in you as i'm sure your work
does so you find it beautiful absolutely absolutely and and inspiring more than just beautiful
so you have hope for human civilization and bitcoin as part of that hope yeah it's a very
optimistic view and people accuse us of being pessimists and saying that we are you know rooting
for the collapse of civilization completely false um bitcoiners are completely wildly optimistic
because they believe that you can monetize a completely new system from scratch and compete
with the strongest superpower and the military and the dollar and everything that goes with that
that's the craziest most ludicrously optimistic proposition imaginable so i think bitcoiners
are the most optimistic people out there i don't think there's a better way to end it on that hopeful
vision of human civilization nick i've heard a lot of amazing things about you i was uh binge
watching your interviews binge reading your blogs fell in love with your work you're a good dude
inspiring brilliant thank you so much for wasting all your valuable time with me today
my absolute pleasure thanks for listening to this conversation with nick carter and thank you
to the information athletic greens for sigmatic and blinkest check them out in the description
to support this podcast and now let me leave you with some words about freedom and beauty
from steven king some birds are not meant to be caged that's all their feathers are too bright
their songs too sweet and wild so you let them go or when you open the cage to feed them they
somehow fly out past you and a part of you that knows it was wrong to imprison them in the first
place for joises but still the place where you live is that much more drab and empty for their
departure thank you for listening and hope to see you next time