Nic Carter: Bitcoin Core Values, Layered Scaling, and Blocksize Debates | Lex Fridman Podcast #173
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 for sigmatic 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 side 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 a 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 approach things with love i may be mocked i may be derided i may be taken out of context or even lied about with the 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 group think 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 bitcoin is explained 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 a hundred dollars 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 view 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 two 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 friedman 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 we're going now we're rolling going right in rolling because you majored philosophy i did i majored in 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 i find that interesting yeah um and it had way more of an impact on my career actually uh than i thought it might you know typically i guess if you do philosophy you go into a lot of finance so it sort of makes sense but um there are a number of philosophers i really admire uh the big 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 um so descartes was was one of my gateways to that do you think everything is noble 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 in these unbelievably complex systems and then i think that's the modern critique of economics like the sort of tilapian 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 fifty hundred years and they turn out to be horribly askew and that's when we have our grace wands and our black swans uh so i'm i'm much more on the sort of you know reality is much less notable 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 that's a good way to put it yeah i mean like look at the dollar system not to pivot this into the dollar right away but the dollar is like shaky ground 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 deflation 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 the 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 it how can you manipulate it i think what we don't understand are the long-term consequences of our structures so like the fed's mandate to target unemployment and steady um you know 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 like people that don't have good intent in central banks like in the system you know uh 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 uh you know act out things that have a lot of negative impacts on the large percent of the population in self in greedy 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 oh i mean i don't villainize those people i think everyone is the hero of their own story right so they all believe that they're forced for 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 um 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 malus 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 if you start answering if you start like saying a lot of things like uh uh you're on the left so if you start explaining yourself well okay yeah 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 of 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 in hitler mode where it's okay to murder a larger part of the population for the greater good so it's like it's this very dangerous slippery slope in my mind so i tried to not uh 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 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 where 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 um 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 confuse people a lot because it's like well you've 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 uh so the two bitcoins get co-mingled 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 uh distinguished practically like you can transact with bitcoin outside of the bitcoin protocol for instance right uh so you know you can transact with bitcoin on ethereum or i have bitcoin on an 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 this is awesome this isn't a bribe this is just a proof of concept okay so this is basically um a bitcoin bearer instrument so i put 100 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 um you know poke off one of the little transistors on this so it can only be spent once uh 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 uh like breaking off like a small part so this basically is a way to physically instantiate bitcoin so it's um it's kind of cold 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 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 the bitcoin uh transaction outside the bitcoin protocol that's right this is you're transacting the currency outside of the protocol so it's analog bitcoin we're we're running an analog which i always 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 is it so this is just kind of a almost like a philosophical statement versus um something that's scalable for 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 uh word for how much money is on here no i mean you can you can plug it in 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 exactly so you know that's protection again so you spending it and then representing that it's still loaded that's fascinating cool yeah so that the other thing i brought you're basically dice uh 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 i don't know if we have time to do all 11 because there's one with my funds logo on it but um it's just basically a tongue-in-cheek joke that the critiques of bitcoin are so formalic 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 got 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 valley 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 as 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 an emphasis on pdp 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 a conflict of visions right uh 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 of the coins were issued in the first four years and then the next 25 the next four years then 12 and a half percent in 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 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 goal 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 bailout of debt debtors a lot of people would 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 we've all you know bought into and committed to is that it's not just non-discretionary so that's sort of one of the first things um 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 bitcoiners have a good track record of sort of staying true to to those core values so that you know the you mentioned values and and like sticking to the monetary thing but there's bigger values uh there's almost like psychological values that are instilled in bitcoin uh you make a point that bitcoin for many is a vessel quote for their expectations hopes and dreams uh can uh 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 um 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 uh simple i would say like ultimately it doesn't you know pretend to do very much it really just settles transactions um but people do superimpose their own views on it for sure um 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 the censorship resistance then you have the fact that it's a cryptographic based system and uh 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 that the founding of this country the one thing i don't like personally behind uh bitcoin and cryptocurrency is that money's involved and it's like people's life savings sometimes are involved so there is naturally a kind of fear a self-preservation uh like instinctual kind of dogmatic thing that comes in where you're not the best of human nature you're 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 that's just like um 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 principal discussions yeah about ideas well it's an interesting intention i try to stay balanced despite being very exposed to bitcoin so let me ask the ridiculous question just in case who's satoshi 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 i'm not really a programmer so um there's a lot of theories but honestly it's one of the greatest mysteries of all time because even bitcoins 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 asked someone 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 or 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 uh if you read the coinbase s1 their 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 the 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 prospectuses 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 i think elon was somewhere in the legal documents where 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 it's 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 1 to 1.2 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 not there's not even like prominent figures like you have for like ethereum you have vitalik buterin it doesn't there's a lot of like top minds talking about like yourself but it's not like one or two do you think again is that a feature or 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 counter-intuitive 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 county on that as money enters the economy has an uneven flow right so you see this in the 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 cantelon insider cantelon outsider effect and it's the same with a 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 there's core developers that people listen to because it's i would say meritocracy largely and they're sort of self-appointed high priest 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 you use the scribbles 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 minors what are nodes full nodes what are blocks what's proof of work is there uh a nice way to wrap up a clean explanation of the protocol oh man that'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 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 and really any monetary system is just a ledger with physical cash we benefit from the physical instantiation of the money so the physics is the ledger the physics is a ledger right same with gold right you can't just produce new units of gold so we trust that gold atoms are hard to create um although not impossible right um you could uh fire a bunch of protons and 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 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're 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 when i say five to 600 million transactions that have ever occurred on bitcoin so full node contains all the transactions ever transacted on the the bitcoin blockchain and that's i saw it's like 200 gigs or something like that it's 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 sure 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 and 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 if you're spending 50 units of bitcoin uh you had that bitcoin to spend in the first place uh so it's sort of delicately poised between node operators who 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 in the box 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 uh 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 six point two five bitcoins and a bitcoin's worth fifty five thousand dollars 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 represent it 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 shawn 256 it's just that you're searching through the big mathematical space to find the needle in the haystack you're just doing lots of iterations of a simple puzzle that's just brute force hence like the stability of 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 sha-256 yeah there's a lot of discussions in from the quantum computing space but everybody i i talk to all my colleagues and that work on quantum computers uh say this we're quite a way quite a long way away from that being an issue in uh cryptography and then and certainly in asian cryptocurrency that should have been one of the sides on these dice should have been quantum because i don't think it is i forgot to put on this edition people should check out scott aaronson there's a lot of people that are kind of um selling quantum snake oil so you should be very careful i think it is a really exciting space that might change the world in the next decade or 100 couple hundred years uh especially for simulating quantum mechanical systems but in quantum machine learning uh people should check out tensorflow 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 scott erinson 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 this 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 dayton 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 what it means when someone does a fight a fake uh phone call saying that you're holding someone hostage at your house and the swat team goes it's pretty scary wow internet warfare tactic yeah but uh the block size warf i would say effectively ended um although we're definitely gonna 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 battlecry 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 it on it like why does satoshi set the limit to one megabyte all of a sudden almost secretively and in the beginning there was no limit whatsoever yeah i mean we can get into and people have spent thousands of hours poring 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 uh 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 uh that's stock basically and uh 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 blocks 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 are not going to be able to run a full node so there's a fixed number this is 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 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 to have blocks sufficiently large that 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 transaction is 350 bytes so you know you could add a push to for 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 rebroadca 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 as you as you're calling them the small blocker and the big blocker sides and so that takes us back to the uh 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 operation so the big blocker yes it allows you to be visa and do a huge number of transactions but it becomes centralized and the small blockers you cannot actually do kind of merchant style transactions but you get the decentralized benefit well i don't even think the big block approach would allow you to be visa frankly because there's effectively one node at the visa network right 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 scale is a 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 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 block of 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 universally 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 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 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 they say 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 as a hard fork is a expansion of protocol rules and a soft fork as 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 softwork is in theory backwards compatible so 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 what the heck is bitcoin satoshi uh 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 the fork of bitcoin cash so hard fork of bitcoin yeah so and so now there's multiple big blocker block chains floating around it's like what are your thoughts about them well i was 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 i see 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 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 so in like the ranking of different cryptocurrencies what is it bitcoin ethereum is ethereum in value uh yeah number two and then bitcoin cash is the one that it's in the top five right but it's 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'll give you a different answer but yeah full disclosure you know i have my sympathies and i think the small blockers won that skirmish 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 the indication it's 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 at 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 ach basically interbank settlement systems so you've got these slow moving but high assurance settlement systems fedwire is probably the number one you know like when you send a wire that's using the fedwar 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 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 have fed wire where your average transactions in the millions of dollars and there's only a few hundred thousand transactions a day it'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 the 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 uh 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 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 well there'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 yeah and and that's a really rare occurrence so it's okay for that to be handled uh in this in the small block debate uh handled at a rate that's much much lower than the rate of the transactions that's kind of it'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 final settlement when you do a transaction and oftentimes that causes there are there's pluses and minuses on the plus side you have 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 a 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 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 this layer two yeah layer two you could say and basically the intuition is 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 it's the same idea you're opening a channel an ongoing relationship with your counterparty and so lightning has you open a channel the 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 downsides to this like have you seen flaws in the whole system from a 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 i 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 guys somewhere well they used to be able to i haven't made a new addition 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 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 side chains or soft forks of bitcoin you've mentioned something about schnoor and taproot 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 schnorr and toproot that's the first new protocol upgrade since segwit in 2017 which was what laid the groundwork for lightning to be developed basically and fruit 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 any something interesting to say technically about what are the things that's actually going to improve and um maybe on a 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 uh 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 schnorr top rate is a good change to bitcoin and 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 if 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 a 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 only just been unencumbered when satoshi created bitcoin i believe it's a better signature scheme than elliptic curves which is what uh big than ecdsa which is what bitcoin uses and uh 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 snore which is just a different signature scheme which is more efficient um and it has better properties like if you want to do a multi-signature transaction where many people collectively sign in order permission a spend that would be more efficient in a bytes sense than uh ecdsa for instance so it's pretty incremental and then toproot is all about having transactional conditions that are sort of withheld from final entry onto the blockchain um so it it's kind of a way to um have more private conditional transactions on bitcoin so both of them i would say are incremental uh changes is this an over-exaggeration that channels approve might improve privacy and scaling which is it like at the high level things that people mention is that just like a dramatic way of of trying to frame uh 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 bite 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 yeah i've spent the last five years you know tackling these every day so are the the dice the same uh those two are the same yeah there are three editions so let's go [Applause] okay go with the dice what do we got oh silk road what does that mean road classic classic situation so i mean that was the darknet 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 payments network behind this darknet marketplace and uh 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 uh 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 in 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 nick yeah in in a genius way has put together maybe we could do a couple more oh said that it was satoshi something satoshi coins satoshi coins we 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 touch we've already hit on the dice no merchants that that's no longer true about that yeah there's a scalability one and i think that one has 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 settle to bitcoin so oh so they don't uh they do something like the lighting network internally so something like this the middle kind of mechanism well honestly i'm not sure exactly how it 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 layers the settlement layer i think that's what you're getting with the boiling oceans is this is like the impact on uh weather and the environment and the environment so uh you know 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 heard renewed uh you know bellyaching 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 it's something that's sort of unrebuttable if you fundamentally contest the validity of the bitcoin system so if bitcoin is like a thing that will take over it 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 relative to the benefit it provides if you think it's not going to be if it's just a volatile uh way to uh to make a little money in the short term then you see the energy used as really wasteful that's totally spurious yeah 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 synergy 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 gonna 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 need it 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 and 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 um and so this is why so much bitcoin is mine 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 sichuan yunnan inner mongolia and zhang 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 these 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 um 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 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 when we implemented sub-graded 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 value of bitcoin because if this threat had gone through it could have split bitcoin and it had 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 the 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 uh so that's my current model for controlling bitcoin i think if you asked a minor 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 in the following sense where it will not have the impact uh that you have a vision for it that you will not 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 uh 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 would have to happen for bitcoin to just be irrelevant basically um either central banks totally clean up their act and uh 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 just to remediate the debt issues we have uh 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 completely opposite direction but most people seem to be noticing the stirrings of inflation in society and 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 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 hal finney 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 god-like 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 luger you know they never they never recognized any of the 50 billion dollars that they made from bitcoin right 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 ten 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 privilege 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 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 a key actually move when that was that was uh probably one of the most important moves at the founding of this country that's right george washington could have been a king probably if he'd wanted and satoshi could have been 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 percent 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 obtain 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 going to release it there would 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 just have people that would invest a ton of money in mining for instance but most new blockchains 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 power it'd be challenging too and people have tried to do air drops you know where they you know distribute coins to a large number of people basically doesn't work most people don't care about the air drop 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 as has its credibility i don't know how you could overrule it on those important features what about bitcoins comparison to other current cryptocurrencies so bitcoin versus ethereum for example why um is it possible that ethereum overtakes bitcoin that's certainly possible yeah i'm not ruling it out um 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 extremely rare in ethereum 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 i'm 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 co-exist so like in the future is do you see a world where you know uh ethereum captures some large percent of the market and but nevertheless the minority a hundred percent 100 percent bitcoin has already been tokenized and put on to ethereum many units of bitcoin i think over a billion dollars worth so not only 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 the 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 yellow or you know the alligator and the teeth cleaning fish or whatever right so oh 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 um 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 accretive 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 sync for bitcoins which are sort of now they're injected into this third-party protocol and that i think reduces the velocity of bitcoin overall and it's probably good for the valuation so you see it it quite possibly 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 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 is failed granted there was a lot of ether in there but i think that shook the credibility of the ethereum system it 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 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 in hacks on ethereum and a lot of contracts have gone south a huge amount of value but they didn't get a bailout and it was just when you know this specific contract called the dao dao was hacked that you know the leadership intervened and 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 that would 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 in 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 plan 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 uh in the 90s there was 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 um 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 policymakers 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 they just forget politicians it sucks to lose a job for an individual you know you could say the company the creative 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 attention we live in society is having a basic safety net for our world um 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 um you know there's like a in 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 uh 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've 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 this slow march down because whenever there was a hint of a crisis in the economy where financial asset prices started to fall their reaction is okay we'll inject more capital into the economy we'll save it but my view is that these political short-term measures cause the buildup of a huge amount of fragility in the long term and then the ultimate collapse is much worse than the counterfactual 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 dolly 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 uh over 60 000 i guess it is now do you think it's possible it goes over a hundred thousand do you think it's possible 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 dollars crashes all it appreciates against um not that i expect hyperinflation but yeah i mean look 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 ten trillion eleven trillion dollars in the aggregate do i think bitcoin can be more culturally and economically salient than gold in two decades time 100 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 a billion you know it 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 you become the main base layer for all our transactions so like even banks will use bitcoin essentially and like visa would use bitcoin as the base there like it would actually operate 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 uh 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 you can compete with visa no visa adopted bitcoin right uh 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 uh banks have now begun they got the green light to provide custody for bitcoin for their depositors that's the first step uh eventually like you know it'll happen 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 will 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 it's something 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 because you know making a 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 uh probably one of the higher profile big investments in bitcoin which is tesla and elon musk but there's also a few billionaires like chamath and all of 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's putting uh buying so much bitcoin i honestly don't know and i would love to truly know elon'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 which one what point he's trying to make there so you were involved with deutsche kern 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 deutsche coin what do you make of elon and doge what do you make of this particular meme coin is it is it one like a legitimate cryptocurrency or is it too 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 that 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 rothbard 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 refresher the meme like doji haven't heard that name in a long time like where does 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 tesla 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 financially sit here and tell you it's an invalid meme yeah you know if if people believe in it then it's real is there a space for meme coins at this at this time like like doge or somebody or 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 in the digital in uh into cryptocurrency allow them to explore alarm 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 the 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 elon's implied guidance are going to lose money because fundamentally there's nothing enduring about dogecoin it's an ancient fork of bitcoin it's unmaintained they're you know it's probably at risk actually from a protocol perspective it's merge mined with litecoin i think um 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 um 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 uh like for lols at least originally like a meme coin but it's also a uh mechanism for investment and so those are sometimes attention 100 and it's unclear sort of like yeah you know there's the meme with those just 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 uh 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 uh if you make stupid financial decisions it you can remove freedom from your life and that's it could 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 cryptocurrency 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 uh 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 they're literally billions over a trillion dollars at stake now so if you buy dogecoin because some influence around tick tock said so yeah you've now made a financial decision right so i'm not gonna 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 water full 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 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 do you think of nfds yeah i think the in 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 correspondent 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 are an asset class and this is the case with any inflation you look at in history you saw these corresponds speculative manias basically speculative episodes so a lot of us feel that inflation is occurring whether it's in cpi or not the 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 as the fed you know lowers 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 right 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 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 uh 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 uh but i think the notion of creating enduring collectibles or artworks that have accompanied 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 cloud for example i don't know if you saw that if there's ideas built on top of this concept it doesn't have to be enough like ethereum an ft it could be just the concept of non-fungible tokens whether those kinds of things can take hold and they it's less about financial transactions and more about almost like um 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 in 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 it 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 uh did you take did you like take uh 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 is very questionable and then also is 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 are 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 hundred percent yes you know i'm super super bullish on that idea basically creating open protocols 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 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 and open architecture is our way to do that i don't know if it'll be a blockchain but 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 let me ask you about love so uh there is a bitcoin maximalist community that 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 uh 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 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 oh 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 uh 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 sorry to interrupt there's a specific medium where this takes its 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 more 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 a hundred thousand 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 uh 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 uh right yeah 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 hardcore 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 on 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 mean and this is where there's 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 that uh like kindness and thoughtfulness and like 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 an extreme bad faith and the reason why is because we're not just talking about technical questions in fact most of this conversation has 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 was a professor at gw this i saw earlier this week that was amusing about getting all the big corners on a boat and sinking 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 uh 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 i think if you let pride and vanity seep into your writing then you risk uh creating a very noisy signal you know creating very inefficient channel for communicating neural arrangements from your brain to someone else's brain and that's what i think about when i write is like wow i have the power to at scale change the literal physical composition of people's brains right to rewire them 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 you mentioned descartes 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 cocodo or gosam 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 our tangible experiences um but yeah that so that's the beauty of writing and um 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 uh 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 is a value to striving for simplicity in 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 uh 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 red they are you know they're displaying it's like a peacock style display what fraction of people write 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 uh is is not one where we assign credibility to the person like like that was uh 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 uh it's unfortunate that there's that tension as a reader that we appreciate the be the beauty and power of like complex weaving of words without assigning as much uh value to like actual clear communication of an idea and i'm almost skeptical in speech as well when someone will describe someone as articulate i'm always immediately skeptical of the valley of what that person is saying uh because if you articulate you can make bad ideas sound very acceptable and great and norm chomskis has said this before he uh 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 it'll shine through there's something to that there's something to i love that but it's a difficult journey it's a difficult path because then i 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 is there if people are interested in bitcoin or cryptocurrency in your work what are good uh books or resources on bitcoin now from you and from others that you can recommend that in your own journey helped you or you've seen help others well it's very easy or 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 the economic theory hadn't really been worked out very much so you'd 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 are you thinking about writing a book yeah i think it's my duty 100 everyone that has created a lot of bit 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 yeah where do you lean on those different book journeys that you might take on like do you have a new 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 um 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 jonathan beer who runs probably the best research desk in the industry 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 do 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 uh 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 in in the first sort of five years of its life so there's a 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 yeah but they were the ones that we got so it's one we got but is there uh is there resources you're basically saying just throw a dart and uh 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 complimentary writings that's very important is to try to understand the intentions behind the system and also to understand the system without having your view colored by some third parties description of it most descriptions of bitcoin are really bad uh so the just go to the originals go to the hal finis post satoshi's post 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 yeah 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 safedeen's view of monetary policy bitcoin makes a ton of sense so you don't 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 battia which goes into more depth about what i was talking about earlier in the conversation the layout approach to scaling and that's a really critical thing to understand then technical books about bitcoin i like grocking bitcoin uh which is a very computer science-heavy one there's a good textbook um called uh bitcoin and cryptocurrency technologies um by arvind naranian i think he's um a princeton um computer science professor which is really good at building intuition um antonopoulos's books uh 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 john pritzker which is good you have bitcoin clarity by qr bickers 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 your your 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 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 um 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 they're just impossible to comprehend like um uh christopher nolan's latest film oh yeah you needed like a spreadsheet to understand that yeah 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 the 2001 space odyssey it's a it's so obviously it's many 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 uh 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 and that takes genius actually which is why kubrick is regarded for what he is what advice you've taken an interesting journey through your life uh you've you worried 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 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 yeah 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 successfully at it 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 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 were 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 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 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 uh you heard it here kids don't listen to anything nick just said exactly wear a green tie to your interviews it'll work out well uh do you think there's a meaning or reason to any of this this existence this life well we we make our own meaning for sure 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 100 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 is 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 compl are wildly optimistic because they believe that you can monetize a completely new system from scratch and compete with the strongest superpower in the military in 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 binge watching your interviews binge reading your blogs i 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 blinkist check them out in the description to support this podcast and now let me leave you with some words about freedom and beauty from stephen 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 and when you open the cage to feed them they somehow fly out past you and the part of you that knows it was wrong to imprison them in the first place rejoices 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