The following is a conversation with Nick Carter, who is a partner at Castle Island Ventures,

cofounder of CoinMetrics.io, and previously a crypto asset research analyst at Fidelity Investments.

He's a prominent writer, speaker, and podcaster on topics around decentralized finance,

and especially Bitcoin. Quick mention of our sponsors, The Information, Athletic Greens,

ForSigmatic, and Blinkist. Check them out in the description to support this podcast.

This conversation with Nick Carter is part of a series of episodes on cryptocurrency

that is a small journey of exploration I'm on because I find decentralized finance and especially

Bitcoin fascinating, technically and philosophically, especially because it may be the very mechanism that

achieves a global decentralization of power, giving more sovereignty to the individual,

and making our systems more resilient to corruption, manipulation, and in general,

to the darker sides 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 am 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 approached things with love, I may be mocked,

I may be derided, I may be taken out of context or even lied about. With a growing platform this

is sadly only increasing. I now have learned that there's people who are waiting for my missteps

so they can point the finger laugh and say see I told you so that guy's a joke he's a fraud.

As a fellow human being the knowledge of this is painful. Yes I know people tell me to toughen up

and my life has been about strengthening my mind in the face of my limits but I refuse to not be

fragile and wear my heart on my sleeve. It's who I am. In some sense this is the immune system of

the internet but let us be careful not to destroy the good ones in the process. The Bitcoin community

had to endure many years of attacks from quote unquote experts and also fraudulent cryptocurrency

efforts that scam people out of their money. This created a powerful immune system that

fought the attackers and the scammers. I understand this and I also understand that one of the beautiful

aspects of Bitcoin is its community of humans is decentralized but some small part of this community

has come to enjoy the us versus them battles sometimes for the sake of the battle in itself.

This happens in political discourse as well. I understand this but to my limited mind it sounds

like groupthink which has powerful defense mechanisms against bad ideas but has dangerous

consequences if taken too far as in many periods of human history that I often talk about where the

us versus them thinking has led to the suffering of many. Again I understand the value of this

as many Bitcoins explain to me but it's not the way I as a sovereign individual choose to walk in

this life. By the way none of this podcast should be treated as financial advice before Nick kindly

gifted me with 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 of you or even think poorly of you. I would love to hang out in person give you a big

old hug and talk about life over some beers. If you see or hear me say something stupid which I'm

sure I do often or something you disagree with and you still respect me as a human being please

show your love as I always do to you but also send me some links to blogs, books, videos, podcasts

where people describe why my stated idea may be totally wrong. I love this kind of long form

disagreement. I humble myself every day by reading books and blogs by people much smarter than me.

Sometimes it strengthens my ideas sometimes it totally changes them but I always learn.

This is a too long way of saying that I'm here trying to walk with grace and with an open mind

a bit of patience and always love. If I make mistakes cut me some slack like you I'm only human

allegedly. This is the Lex Freeman podcast and here is my conversation with Nick Carter.

What philosopher or philosophical idea had a big impact on your life not just in the space of

cryptocurrency but in general? Oh so we're 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 find that interesting

and it had way more of an impact on my career actually than I thought it might you know typically

I guess if you do philosophy go into law or finance so it sort of makes sense but

there are a number of philosophers I really admire. One of my favorites would be Descartes

probably the notion of skepticism it's sort of a rabbit hole it's kind of hard to pull yourself out

of it basically the brain in the vat theory pulling yourself out of that but yeah I really like

epistemology you know questioning what it is to have knowledge so Descartes was one of my gateways

to that. Do you think everything is noble like we humans can can know fully the objective reality?

Oh definitely not no I mean reality is very much processed through your own you know subjective lens.

So how much do you think do we understand about this world because a lot of your ideas a lot of

things we might talk about today are kind of trying to figure out human civilization how humans

how human behavior works at scale all those kinds of things that kind of assumes that we have it

or we're able to somehow figure most of it out right so in your sort of when you step way back

how much of it have we really figured out? Well I think that's the conceit of economics is

thinking that you can model human behavior right and these unbelievably complex systems

and then I think that's the modern critique of economics like the sort of Tel Aviv and 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 datasets

trained on the last 50 hundred years and they turn out to be horribly askew and that's when we

have our grey swans and our black swans so I'm much more on the sort of you know reality is much

less knowable than we think side of things but it is nice to have very concrete things like Bitcoin

that's for sure. Oh so you think so most of it is shaky ground but there are some things there's

like islands of sturdiness. Yeah Bitcoin is one of them. That's a good way to put it yeah I mean

look at the dollar system not to pivot this into the dollar right away but the dollar is like

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 policy makers don't understand

these things economists don't seem to understand them what is inflation how do you define inflation

none of these things are really known or knowable. So a lot of people kind of make a claim that there's

a lot of manipulation possible with the dollar with those currencies if you couple that with the

fact that people don't understand it and yet there's claims that being manipulated by centralized

power how do you bring those two ideas together if no one understands that how can you manipulate it.

I think what we don't understand are the long term consequences of our structures so like

like the feds mandate to target unemployment and steady exchange rates or low inflation

you know what we don't understand is okay what is the result of doing that continuously for 40 years

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 a longer

term features we don't understand. Do you think there's like malevolent people with people that

don't have good intent in central banks like in the system you know when you have centralized power

or any forms it's susceptible to somebody hacking the system taking the power and in the shadows

this is where conspiracy theories come in right in the shadows be able to you know

act out things that have a lot of negative impacts on a large percent of the population

in self 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 their force are good in the world you have to

are there any true villains I don't think so I think they get socialized into a world where

they believe their particular skills and their mandate is you know what they should be doing. I

think they might be presumptuous or arrogant in some cases and you know I think it's more of a

systemic issue where you have a small handful of very homogenous types of people with PhDs

from the same institutions that are brought up in the same cultural context that you know set policy

and wield a tremendous amount of control over society and I think they have this notion that you

can tinker society you can play with a few key variables and tinker society into a state that

is desirable or good and that's what they're trying to do and I think the consequences of that can

be pretty bad but no I don't think it's born out of malevolence. There's an interesting idea I think

Michael Malis brought it 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 you're on the left. So if

you start explaining yourself well equipping as a good term for it. I was really 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 and

Hitler mode where it's okay to murder a large part of the population for the greater good.

So it's like it's this very dangerous slippery slope of my mind so I tried to not uh yeah I was

always uncomfortable with that kind of test or even that kind of thought and yes the same applies

and suppose in government in central banking is if you think some people are better than others

applying your idea of what is good can have large scale detrimental effects.

Of course. Yeah. I'm glad you didn't pose me the question. I mean I think it maybe the left right

axiom isn't the disjunction isn't the way I would sort of put it but to me it's just if you reason

in a consequentialist way that lends itself to authoritarianism whereby you think you can shape

society and only you can shape society in a positive direction according to your specific

objectives. So let's step onto the land of sturdiness that is bitcoin. What is bitcoin

and in your view what are you know the principles the philosophical foundations of bitcoin?

Well bitcoin the term I think refers to two things specifically so one is the protocol for

conveying value through communications channel. So just a set of rules that we collectively opt

into in order to transact online or just add a distance and then the other thing is the name

of the asset the sort of monetary unit which circulates within the system and that always

confuse people a lot because it's like well we've got uppercase bitcoin lowercase bitcoin

white and satoshi just gives them different names like in ethereum you've got ethereum

the system and then ether although people don't really talk about ether very much but they

you know chose to distinguish them in bitcoin for whatever reason they're not distinct so the

two bitcoins get commingled all the time in the explanations. Did you find that's a problem that

confuses things? I mean what's really a distinction between the protocol and the currency? Well they

are sometimes distinguished practically like you can transact with bitcoin outside of the

bitcoin protocol for instance right so you know you can transact with bitcoin on ethereum or

I have bitcoin on 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. That's awesome. This isn't a bribe this is just a proof of concept. Okay. So this

is basically a bitcoin bearer instrument so I put a hundred bucks of bitcoin on here and to spend it

you have to basically physically destroy part of the device you have to poke a hole and you know

poke off one of the little transistors on this so it can only be spent once so and you can't

extract the private key from this device so the private key was generated on device always stays

on the device so what it means without like breaking off like a small part so this basically is

a way to physically instantiate bitcoin so it's um it's it's kind of gold yeah effectively so here

this one's limited edition it's orange so what is it called again open dime the point is if you

wanted to settle a bitcoin transaction instantly the kind of the same way that a cash transaction

is instant final settlement right you would do it with a device like this so if I was buying a house

from you know you might prefer to do it with a physical bearer instrument as opposed to waiting

for confirmation on the bitcoin blockchain so the moment I hand that over to you goes in your

possession you're the owner there's no way for me to have retained the private key like

I could have created a bitcoin paper wallet and given that to you but you have no assurance that

I didn't copy down that you know the key elsewhere so this solves that problem so this is a physical

instantiation of the bitcoin transaction outside the bitcoin protocol that's right see this is

you're transacting the currency outside of the protocol so it's analog bitcoin we're we're

running an analog which I was like because bitcoin is this immaterial thing and so it's

nice to have physical totems how much does it cost to manufacture this you know like 15 bucks or

something I is it so this is just kind of a almost like a philosophical statement versus

something that's scalable for for use like you know the point of bitcoin is to be in the digital

space right but this shows like bitcoin can be anywhere it's useful for gifts but yeah I mean

I don't know if it would be a suitable foundation for a physical bitcoin economy in theory these

would be like cash like instruments that you could use to transact well I just mean post apocalypse

yeah yeah but you still need you still need to plug it into your laptop to actually verify

that there's coins on there so you still need the internet so I have to take your word for how much

money is on here no I mean you can you can plug it into your laptop and check yeah but to transact

to extract bitcoin from this I need to break yeah you have to poke a hole through the the

little hole and that renders it spendable basically so you know that's protection against

you spending it and then representing that it's still loaded that's that's any cool yeah so that

the other thing I brought you're basically dice 12 sided they don't have any bitcoin on them so

they just have a bunch of different critiques of bitcoin on each side we'll go through them then

this is awesome I don't know if we have time to do all 11 because there's one with my phone's

logo on it but it's just basically a tongue in cheek joke that the critiques of bitcoin are so

formulaic at this point that you can just put them on dice yeah 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 the the philosophical

foundations of bitcoin like how do you see bitcoin outside of just a basic protocol and a basic

currency it seems to be like you said it seems like sturdy ground so what do you mean by yeah

yeah so it's not just any protocol for moving value around it's not just any currency it's got

specific rules and values that are embedded in it and this is an important point is the bitcoin is

the encoding of certain values which are often misunderstood or not acknowledged necessarily

and so it's sort of impregnated with values and what they are specifically is a topic of debate

and there have been civil wars fought over the values inherent in bitcoin you know one of them

was should bitcoin be this cheap scalable the base layer low fee payments system

with a emphasis on p2p payments or should it be more of this like gold like digital commodity

that would eventually settle infrequently and mainly between institutions right so that's

fundamentally conflict of visions right but the so you know keep in mind that this is just

one man's opinion I don't speak for bitcoin right so I would say the key the key number one

value that's embedded in bitcoin is the notion of non discretionary monetary policy so algorithmic

monetary policy as opposed to human based monetary policy satoshi was very clear about that bitcoin

is an alternative to modern central banking where you have constant tweaking constant intervention

which satoshi felt leads to credit bubbles and so on so bitcoin proposes a completely

non discretionary monetary policy sort of decays over time 50 percent of the coins we're shooting

the first four years and then the next 25 percent the next four years then 12 and a half percent

the next four years until you get to 21 million units and none of those numbers really matter

like it could have been 25 million units and it could have been a more aggressive slope or a

more gradual slope but what matters is that this schedule was proposed even before the code was

public the schedule was proposed and then we all collectively agreed to stick to it and that is

kind of a first for monetary system I mean gold kind of has that property right because gold the

supply of gold above ground only really increases at one to two percent a year so it's it's sort of

inhuman which is a good feature right you don't want to give humans that much control over it

but 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 or as it was a lot of people let's say a lot of people had debts denominated

in bitcoin and we needed loose accommodative monetary policy to bail them out that's not

possible we couldn't have a jubilee denominated in bitcoin because the social contract we've all

you know bought into and committed to is that it's not non discretionary so that's sort of one

of the first things and I think ultimately that comes back to basically a strong respect for

property rights because if we were to have unanticipated inflation let's say you know really

charismatic leader somehow commandeered bitcoin and convinced everyone that we should have 30

million units and not 21 million that would basically be dilutive on everybody that held

bitcoin and had opted into the 21 million set of coins an additional 9 million unanticipated

would have a dilutive effect on everyone else and that would be a covert way of effectively

stealing their purchasing power through inflation is that possible that kind of thing I mean what

what's the mechanism of bitcoin that resists that kind of charismatic leader well we've had

people that have had a lot of influence in bitcoin in the past and they've

tried to make changes to the protocol not as dramatic as that but bitcoiners have generally

resisted those individuals institutions and they you know bitcoin is 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 there's almost like psychological

values there instilled in bitcoin you make a point that bitcoin for many is a vessel quote

for their expectations hopes and dreams

can now the bitcoin protocol support this kind of complexity of the human condition

so like there's ideas of freedom that seem to be spoken about there's a sort of ideas of

of I mean even love yeah I mean some people kind of use it as a meme like you know bitcoin is

love or something like that you know mostly to troll me because I talk about love all the time but

you know these bigger ideas than just the exchange of currencies yeah I mean bitcoin itself is very

simple I would say like ultimately it doesn't you know pretend to do very much it really just

settles transactions but people do superimpose their own views on it for sure and bitcoins

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 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 base system and you

can hold value in your brain by memorizing 12 words for instance that gives it seizure resistance

which is again a political concept if you wanted to

to desert your jurisdiction with your wealth intact in your brain you know that you know

cryptographic feature of the system the fact that it's built on public key cryptography

and that you can encode a bitcoin private key in 12 words that gives it this political salience

that you know you can you're now empowered relative to a despot basically

yeah i mean there's so many beautiful concepts behind cryptocurrency behind bitcoin

that stand for sort of freedom some of the basic things at the founding of this country

the one thing i don't like personally behind bitcoin and cryptocurrencies that money is involved

and it's like people's life savings sometimes are involved so there is naturally a kind of fear

a self preservation 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 tension

i try to stay balanced despite being very exposed to bitcoin so let me ask the ridiculous question

just in case who is itoshi nakamoto we don't we don't know it's probably not me because

i was um like 17 when itoshi 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're active in the cypherpunk community you

ask them and they sincerely will not know and they may not even have a good guess as to who

sato she is is it important to know or is it like actually important not to know do you think that's

a feature a bug that you we don't know some people don't like the uncertainty especially you know

folks on wall street they really want to know and if you read the coinbase s1 their um disclosure

pre ipo that's a risk factor that satoshi could come back so the the risk management crowd wants

to know because they want to know if maybe satoshi had you know undesirable political opinions or

something that would forever taint the project do you think they were just trolling with that risk

with uh was satoshi's identity being a risk factor or is that like actual like was there an

actual meeting and a discussion of that being a risk factor i think in the risk factor sections of

the prospectus is it's really just the lawyers doing a total brain dump to cover absolutely

everything they can think of so it's just lawyers it's not like uh you know it's like uh i think

elon was somewhere in the legal documents for spacex mentioned that like uh earth governments

have no jurisdiction on mars yeah 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 one to one point two million bitcoin which is like 50 60 billion

dollars worth so some people consider that to be a risk you think it's uh you know this is almost

like a topic of leadership it doesn't feel like anybody anyone person speaks for bitcoin uh not

there's not even like prominent figures like you have for like ethereum you have italic buterin

it doesn't there's a lot of like top minds talking about it like yourself but it's not like one or two

do you think again is that a feature a bug like uh do you think for effective for bitcoin to

effectively have a role in um society that like is as large or larger than the dollar there needs

to be like leadership that represents it almost like democratic kind of thing well that's a real

counterintuitive point because most bitcoiners including myself would say no the lack of leadership

is a great quality to have because if you have a charismatic leader and a foundation or corporation

that controls it maybe they can control the features of the protocol and maybe they can

expropriate holders of the coin or you know build in an endowment that pays them off and

gives them privileged access to the units of the coin for instance so you know we call people

that have privileged access to the money spigot cantillon insiders which is there is this economist

that pointed out that as you know i think richard cantillon that as money enters the economy it has

an uneven flow right so you see this in last last decade or so before that too the consequence of

money printing in this country is people that own financial assets made a lot of money and people

that didn't didn't so you see that cantillon insider cantillon outsider effect and it's the same with

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 of meritocracy

largely and they're sort of self appointed high priests of the protocol i write a lot about bitcoin

people listen to me but it's a completely free market of ideas right i don't have any authority

within bitcoin whatsoever i'm just a scribbler you know just a scribble or so was Aristotle

socrates and Nietzsche okay at the high level technically how does bitcoin work is there

interesting things you could say like what are miners what are nodes full nodes what are blocks

what's proof of work is there a 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 of psychology

the principles around that but sort of building up to that would 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

how governance debates intersect with technical features so i guess we can yeah so basically

at the highest possible level bitcoin is a globally shared it's really a replicated ledger that

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 the 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 although not impossible

right you could fire a bunch of protons that whatever is the adjacent metal and create gold

atoms would be expensive 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 you know the money in your bank account your checking account

we basically trust our institutions or banking institutions to keep a faithful record and then

ultimately we trust the central bank to administer that system so there's kind of a handful of nodes

in bitcoin we trust that the economic incentives of the system are carefully poised basically so

we trust that the free market and mining competition will lead to the miners assembling

assembling transactions into blocks in a faithful and correct way and that we are going to converge

on a global state of the ledger continuously which updates every 10 minutes or so with some variants

and then the miners aren't the sole entities that control the system to really participate

if you are a merchant and you're accepting bitcoin you really want to run your own full node

and check the whole history of transactions sort of something like I want to say five to six hundred

million transactions that have ever occurred on bitcoin so full node contains all the transactions

ever transacted on the bitcoin blockchain and that's I saw it's like 200 gigs or something

like that like 350 something like that it's doable on a regular consumer laptop and that

is going to be really key later on in the discussion but so you know that's really the

ultimate trust models first of all we trust that the miners that assemble transactions into blocks

and they are the archivists you know they inscribe those transactions onto the ledger

and they have an economic incentive to sort of behave correctly because they're getting paid

in no units of bitcoin that's part of it but then really you are also you're not fully trusting

them you're actually if you want to run a node you replay every single transaction in the history

of bitcoin from the beginning to the current day and you arrive at the present state that way

so you don't really have to trust too many people or entities you can validate the correctness of

that all the rules have been followed that all the bitcoins that were created were done so in

the valid way that the inflation rate was adhered to and that there's no covert inflation you know

that if you're spending 50 units of bitcoin you had that bitcoin to spend in the first place so

it's sort of delicately poised between node operators who you know engage in this validity

checking kind of anti counterfeiting checking and then also the miners which are an industrial entity

and they basically produce block space and assemble transactions into blocks

and everybody so the miners are incentivized to not mess with the system because they're getting

value from the system so if they mess with it it's going to decrease the value of their physical

work investment yeah so they have to incur a real physical cost to produce a block right so

right now you get 6.25 bitcoins in a block at a minimum and then maybe some fees as well

and how hard is it to produce a block now well challenging I mean you need

so 6.25 bitcoins and a bitcoins worth $55,000 or so so it's probably going to cost you about

that amount to produce it because it's a free market competition and miners have very free

thin margins so it's like if I auction off a dollar you would pay up to 99 cents to buy that

dollar for me it's exactly what happens with miners they're you know basically competing for

the right to obtain new units of money so logically speaking they would pay up to the value of that

money in order to earn it and for people who are not familiar the process of mining is solving a

difficult cryptographic problem that's a computational problem it's I would say it's not like

people sometimes represented as like a really challenging puzzle like the individual puzzle is

very simple like you can do with pen and paper if you wanted you know like Shaw 256 it's just that

you're searching through the big mathematical space to find the needle in the haystack you just

do lots of iterations of a simple puzzle it's just brute force hence like the stability of the whole

idea of the proof of work if it was a if you if there was a shortcut it wouldn't be it wouldn't

work exactly so let's hope nobody solves Shaw 256 yeah there's a lot of discussions in from the

quantum computing space but at the everybody I talked to all my colleagues and their work

on quantum computers say this we're quite away quite a long way away from that being an issue

in cryptography and then and certainly an issue in cryptocurrency that should have been one of

the sides on these dice should have been quantum quantum because I don't think it is I forgot to

put on this edition people should check out Scott Aronson there's a lot of people that are kind of

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 a hundred couple hundred years especially for

simulating quantum mechanical systems but in quantum machine learning 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're on machine learning on those quantum circuits the the main

point that Scott makes Scott Aronson people should check out his blog too is that like

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 quantum computers will

change the nature of artificial intelligence but there's yet to be an actual algorithm that

or a problem set or a data set where that would be the case so skepticism is good in the space

anyway that said so you kind of explained 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 philosophical foundations yeah i mean bitcoin at this point

we have our own civil wars if you're wondering about how politically intense it gets it's currently

not hot it's cold it's oh yeah we're in a detente right now there's no tanks or missiles at least

not yet hopefully it can get a little violent i guess i think one of the bitcoin core developers

or one of the participants in the war got swatted at one point what's swatted means when someone

does a fake phone call saying that you're holding someone hostage at your house and the swat team

goes it's pretty cool wow internet warfare tactic yeah but the block size war 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 uh 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 in the 15 was when the you know the battle cries began what was the first battle in

the civil war i don't remember but sort of satoshi i don't know if you can comment on it like why

did satoshi set the limit to one megabyte all of a sudden almost secretly and in the beginning

there was no limit whatsoever yeah i mean we can get into and people have spent thousands of hours

pouring over satoshi's writings to find you know which side satoshi was on and you can find

like any textual exegesis you can find evidence for either side right but 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 that's stock

basically and then bitcoin blocks filled up and people that had been socialized into this

vision of bitcoin as an effectively free transactional network like why pay a transaction fee

if you're not at congestion if the block isn't full the miner will mine your transaction for free

right um people that had been brought up in that status quo from 2009 to kind of 2015

they noticed the block started to fill up and they're like okay well let's just remove this

arbitrary limit right what what could possibly be the harm right and then a whole other faction said

no you need to cap the data throughput of the system because if you increase it it's going

to be highly exclusionary and ultimately regular folks are not going to be able to run a full node

so there's a fixed number there's there's a fixed frequency of blocks and so if you want to increase

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

so do you 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 transactions 350 bytes so you know you could add a push to

24500 thousand transactions a day which is not many so if you wanted to get to visa scale you'd

have to increase blocks obnoxiously large the small blockers claimed that this would overwhelm the

ability of any regular person to ingest that data and stay current at the you know state of the ledger

to rebroadcast to replay all those transactions to ensure that the protocol rules were valid so

basically the small blocker contention is that you eliminate the trustlessness of the system

by pushing a ton of data through the system because only one or two industrial heavy duty

nodes would ever be able to run the protocol at that point so by the way in the civil war the

two sides as you're calling them the small blocker and the big blocker sides and so that

takes us back to the the thing that you mentioned that a regular computer could be a node and with

the big with big blocks that's no longer going to be the case so just the number of transactions

is going to blow up the size of the blockchain that every full node has to store and so then

as opposed to a regular mom and pop type of node you're going to have to have data centers

so they're going to have to be owned by large organizations there's going to have to be very

few of them and that's how you centralize the control over this whole uh operation so the big

blocker uh yes it allows you to be visa and do a huge number of transactions but it becomes

centralized and then the small blocker is you cannot actually do kind of merchant style transactions

but you get the decentralized benefit well i don't even think the big blocker approach would allow

you to be visa frankly because there's effectively one node in the visa network right um so you don't

really need to maintain this peer to peer architecture at all um and the amount of data you'd

have to push through the network to reach visa scales are really preposterous amount i mean and

and we have now evidence for what happens when you try and scale up as a blockchain and do 10

million transactions a day which is still not visa scale right you know i've i've you know seen what

it's like to operate those nodes and it's not pretty so there are totally genuine computer science

physical limits um because it's a it's a broadcast network everyone has to be aware of every

transaction and that model which gives you the trustlessness the nice guarantees where everyone's

an equal peer on the network everyone has audited the full history of the transactions

that model falls apart under stress so the small blocker vision is that ultimately you would scale

in a layered approach with the base layer transactions being settlement style transactions

and you know payments happening at the other layers basically is that universally agreed upon

or like to a large degree agreed upon that the small blockers of one 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 andreson who is the guy that

satoshi handed the reins to when satoshi left gavin supported this large block block proposal

uh and so that was that didn't achieve consensus and then there was bitcoin unlimited

and then later on there was a genuine hard fork where the small blockers couldn't or the large

blockers couldn't push through their proposals on bitcoin itself so they just created a competing

version of bitcoin you know so by the way uh so maybe you can comment on but sort of hard fork

versus a soft fork a hard fork is when it's not no longer compatible what's the right way to put

it they can't operate on the same blockchain 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 is a shrinking

of protocol rules that's an interesting way to find it it's not very intuitive so i don't like

that way um another way is that a hard fork is backwards and compatible whereas soft work is

in theory backwards compatible so in in august 2017 basically the large blockers had had enough

and they said we're going to hard fork bitcoin we're going to create a clone an alternative

version of bitcoin which has the same a shared history as bitcoin itself but you completely

fork it and you create a new future and uh but you know everybody that had a balance on bitcoin at

the time also had a balance on the alternative coin bitcoin cash and so that was really that's

what's called bitcoin cash is the hard fork that was one of them there were more actually i mean

what the heck is bitcoin satoshi 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

the changes they wanted to push through uh but bsv was a fork of bitcoin cash so hard fork of

bitcoin cash yeah so and so now there's multiple big blocker blockchains floating around it's like

what are your thoughts about them well i was is it pretty popular sorry to interrupt uh are they

popular i mean if you look at the metrics they're not and oh they they don't trade they i think each

trade below one percent of the value of bitcoin itself so measuring popularity is like how much

they actually oh value uh value frequency of trade oh no no i mean they they do like a fair

number of transactions but there's 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 unseeding bitcoin

right but both bitcoin cash and bitcoin sv which was a hard fork from bitcoin cash itself

are well i believe at this point well below one percent of the value of bitcoin and in the

in like the ranking of different cryptocurrencies what is the bitcoin ethereum is ethereum in value

uh yes number two and then bitcoin cash is the one that it's in the top five right but 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 give you

a different answer but yeah full disclosure you know have my sympathies and i think the small

blockers one that's girmish for sure so at this time there's no merchant adoption and so on so

it's kind of its vision the whole reason for existence for at least for now hasn't materialized

and so that's that's a indication as possible that well it's a sign that perhaps that's the wrong

way to accomplish the scalability well you know first of all i think the layered scaling model is

definitely definitely correct i mean that's absolutely the way these things have to work

given the constraints of blockchains what is the layered scaling model it's really how all

payment systems scale blockchain or otherwise and i think a lot of people don't understand this

is that there is no equivalent to scaling of the base layer in the regular payment space

that totally doesn't happen all of them are built on layers so visa is like the fifth layer

in the payment stack that ultimately depends on these utility scale settlement systems like

fedwire chips a ch basically interbank settlement systems so you've got these slow moving but high

assurance settlement systems uh fedwire is probably the number one you know like when you

send a wire that's using the fedwire system typically on top of that you know you have banks

and then you have payment processors and then you build up these layers and layers and layers and

then you have these fast payments you know venmo venmo PayPal credit debit visa you name it those

payments are not final when they occur you know a credit card transaction will not be final for

90 to 120 days so that's fascinating you've decoupled the payment the financial message

and the settlement those are distinct concepts and the settlement happens on a deferred basis

so that's how you get scalability is you have lots and lots of messages but that they don't

settle for a long time they might settle on a net basis on an end of day basis but so that's

really how it works and then you've fedwire where your average transactions in the millions of

dollars and there's only a few hundred thousand transactions a day that's sort of an interbank

settlement network so that's my vision for how i think bitcoin will develop too bitcoin itself

on the base layer is this slow moving high assurance final settlement network where if you're

sending money to the other side of the globe to someone you don't trust where you want that

payment to be final in a short period of time and both counterparties know it's final then you

would use that but if you wanted to buy coffee you could do it on a second you know second layer

lightning would be one way there's a bunch of side chains now or you could use you know a more

centralized solution if you wanted it's kind of a profound idea that in the space of transactions

when you're buying coffee or buying anything really from merchant or exchanging goods and all

of those kinds of things that most of the time like basic honest behavior human behavior which

it does appear that most of our societies is based on the fact that we're all most of us are honest

is like stuff is not going to go wrong when you do the transaction and you only need like the base

layer whether it's bitcoin whether it's uh i forget the terms you use for the for the credit card

version but you need that just to verify just to like resolve any disagreements or shady shit

yeah and and that's a really rare occurrence so it's okay for that to be handled uh in this in

a small block debate handled at a rate that's much much lower than the rate of the transactions

that's a kind of that's a really interesting idea that when we spend money we didn't actually

exchange the money most of the time yeah most of the time you're not getting a final settlement

when you do a transaction and oftentimes that causes there are there's pluses and minuses on

the plus side of huge efficiency if you use a credit network like visa but that it's in the

name credit right visa is extending you credit right they're kind of guaranteeing your reputation

to the merchant but fraud happens all the time right there's always fraud because you have this

reversibility right um and so you can you know engage in fraud against the merchant um if you

have a final settlement there's no possibility for fraud so that's one reason merchants kind of

like accepting bitcoin because once you receive an inbound bitcoin payment and you deliver some good

or service you know that payment can't be reversed but frankly most of the transactions we

you know undertake on a daily basis do not require those strong assurances of final settlement

there's one exception which is physical cash with physical cash or the open dime a cash like

product you actually are getting final settlement but online most online banking transactions most

p2p uh digital wallet transactions in the dollar system they're not really final at all you mentioned

lightning lightning network what is it what are your thoughts on it and what are your thoughts about

any kind of alternatives so lightning is one potential payment solution built on top of bitcoin

where you have different assurances different transactional assurances but ultimately it's very

proximate to the base layer so if something goes wrong you can always basically settle to the base

layer just layer two yeah layer two you could say and basically the intuition is it's kind of like

opening a bar tab so you go to the bar and you might drink a dozen beers over the course of the night

maybe half a dozen and well I guess nobody goes to the bar these days but let's say you did yeah

you open a tab and at the end of the night you settle up once you're not necessarily paying

each time you get another beer so it's just it's the same idea you're opening a channel

an ongoing relationship with your counterparty and so lightning has you open a channel with

a counterparty and you're sort of sending back and forth these cryptographic commitments saying

you know I agree to send you some bitcoin but you don't necessarily settle each time you make a

transaction so you do hundreds of thousands of transactions in a channel the other thing

lightning proposes is saying okay well now that we have channels established what if we interlocked

a number of channels together so if you and I have a channel and you know me and my buddy have a

channel my buddy can now pay you because you're you have a relationship through me basically

and so lightning is this network this overlay network that sits on top of bitcoin

and allows people to transact in a much faster and less frictional way without the need for bitcoin's

kind of slow periodic settlement 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 when I

initially sold those dice I sold them on lightning it was one of the first merchants to use lightning

back in the day the first edition of the dice so people could buy these dice somewhere well they

used to be able to haven't made a new edition recently they're very scarce and very special

they're like physical NFTs just kind of yeah I mean the flaw with lightning is really that you

you know and this can be remedied in a number of ways but you have to sort of pre fund these channels

so it's it's a weird concept to have to inject liquidity into a channel in order to accept

a payment you know so I'm sure those user experience problems can be solved but it's still

uh in a state of relative immaturity so we'll see in terms of other ideas that are uh side

chains or soft forks of bitcoin you've mentioned something about snow and taproot

um what are your thoughts about this update to bitcoin and in terms of its promise to improve

privacy and scaling so on and what what other things are you interested excited about in terms

of the development of bitcoin well snow and taproot that's the first new protocol upgrade since

segwit uh in 2017 which was what um laid the groundwork for lightning to be developed basically

and snow and taproot is really the first protocol change in three almost four years now so it's

we're very excited about it what uh what i mean is there anything interesting to say

technically about what are the things that's actually going to improve and maybe on the on the

politics side bringing a protocol change uh on bitcoin what does that actually involve yeah i mean

it's a huge deal because the last time we tried to make a change to the protocol we had whole

civil war over it and it was incredibly difficult to get segwit activated in 2017

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 snow taproot

is a good change to bitcoin everyone generally supports it but everyone kind of has ptsd over

the last time when we tried to change bitcoin and so we're sort of really dithering over how we

actually want to implement it so it's taking forever because we're trying to set the protocol

for how do you change bitcoin itself and that all of our assumptions went out the window last time

so we're trying to reset and decide what is a legitimate way to institute a change to bitcoin

so that's actually the big question right now it's not should we implement these changes we

basically all agree that we should it's a meta question is what's the valid way to implement

new changes to bitcoin what's the way that is scalable in the long term and will last and people

will consider credible even if this one isn't controversial at all so that's where we're at

we're basically debating over how do we implement this change that we all want to get a feeling of

how slow bitcoin governance is and how deliberate it is everybody collectively wants the change

but we haven't fully agreed on how we're going to put it into bitcoin so it's the classic sort of

bitcoin situation but what it is is i mean schnore is an alternative signature scheme i think it was

encumbered by a patent and it had only just been unencumbered when satoshi created bitcoin i believe

it's a better signature scheme than elliptic curves which is what

than ecdsa which is what bitcoin uses and so it's been long enough that we now trust it you know

kind of in cryptography it's meant to be lindy you know it's sort of you want to test it over time

and then it's considered safe to use so schnore has been around for long enough that

we've decided to rip out ecdsa and insert schnore which is just a different signature scheme which

is more efficient and it has better properties like if you want to do a multi signature transaction

where many people collectively sign in order to permission to spend that would be more efficient

in a bytes sense than ecdsa for instance so it's it's pretty incremental and then taproot is all about

having transactional conditions that are sort of withheld from final entry onto the blockchain

so it's kind of a way to have more private conditional transactions on bitcoin so both of

them i would say are incremental changes is this an over exaggeration that schnore to

approve my improved privacy and scaling which is it like at the high level things that people

mention is that just like a dramatic way of trying to frame what's fundamentally an incremental

improvement yes but incremental is the word right it's not we're not going to get an order

of magnitude enhancement to either privacy or scaling but we will get a considerable enhancement

but privacy and scaling are actually two sides the same coin because you get more transactional

privacy by removing data from the ledger so that there's less metadata for people to

surveil and analyze and that's also you scale by compressing and being really space efficient

with transactions and the more parsimonious you are the more economically dense dense each

byte that everyone has to retain on the ledger is and so those are you know very closely allied

concepts so do you mind if we go through some potential criticisms of bitcoin totally this

i spent the last five years you know tackling these every day so the dice the same those two

are the same yeah there are three additions so let's go okay go with the dice what do we got

silk road was that mean road classic classic situation so i mean that was the dark net

marketplace set up by ross albrecht in the early days of bitcoin that's one of the first killer

apps for bitcoin was being the the payments network behind this dark net marketplace and

you know where you'd go to buy drugs and things and so that became associated with bitcoin if

you remember the press coverage from back then but over time that faded and it became less of a critique

but so like the the critique is that bitcoin is something you would use for illegal activity

for drugs for crimes all those kinds of things as opposed to for any kind of legitimate transactions

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 market

places and if you're just tuning in this incredible 12 sided die has 11 common criticisms of bitcoin

that nick yeah in a genius way has put together maybe you could do a couple more

oh so that it was uh satoshi something satoshi coins satoshi coins we when we touched on that

early in the episode what if satoshi returns and sells all of their coins so we don't know for sure

how many coins satoshi actually mined or produced because there's a degree of probabilistic analysis

that you would do there's a few few thousand blocks that were mined by what we think is

a single entity in sort of 2009 and so if you add them all up you get to about a million so people

think that satoshi mined a million coins and then they're worried that satoshi would return and

market sell all the coins thus crushing the price of bitcoin so looking at some of these

uh no ceo i think we did we see we've already hit on the uh no merchants that that's no longer

talking about that yeah uh there's a scalability one and i think that one is addressed the idea

that you're mentioning with the block size debates and the lightning network that by adding extra

layers on top you can do you can achieve scalability that's my vision that's my theory um and you know

you can do it in a permissionless and a permissioned way like coinbase is a big bitcoin exchange

they provide scalability they're a financial institution you know you can settle up internally

on their own database and then you know periodically settled to bitcoin so oh so they don't uh they do

something like the lightning network internally so something like this a real kind of mechanism well

honestly i'm not sure exactly how works they might have that built in but just generally speaking

institutional scaling is a model for scaling right where you could have banks holding bitcoin and

they issue notes against bitcoin and those are your payments and then the base layer is the

settlement layer i think that's what you're getting with the boiling oceans is this is like the impact

on um weather on the environment on the environment so uh you know that that is a concern that people

have in terms of like the proof of work requires that there's a lot of computational resources and

being used and that requires a lot of energy and like some large percentage of the world's

energy is used to to mine bitcoin what's how how would you respond to that criticism yeah i mean

that's been the loudest critique of bitcoin this year in the press this year really yeah so i mean

it's not like a new criticism but bitcoin is consuming more energy than ever so as the price

rises the electricity consumption rises and so we've we've we've heard renewed uh you know

belly aching over this for sure i mean it's if you don't believe that bitcoin is useful then

you're inclined to think that all the energy consumption is a waste so that's you know it's

it it's something that's sort of unrebotable if you fundamentally contest the validity of the

bitcoin system so if bitcoin is like a thing that will take over will become like the main

mechanism of financial transactions or transactions period in the world then you say well the cost of

energy use is actually quite low relative to the benefit it provides if you think it's not going to

be if it's just a volatile way to to make a little money in the short term then you see the energy

use is really wasteful it's totally spurious yeah so so then there's no really response i suppose

that's so i can totally you know get into the details of bitcoin's energy mix and things like

that but that's like at a high level what the debate is it's this normative question like

does bitcoin have an entitlement to consume any of the world's resources and that's actually where

the debate should end much of the time because a lot of people fundamentally dispute the the

validity or usefulness of bitcoin as a system and so of course they're gonna consider the energy

usage illegitimate now there's a lot of mitigating factors if you you know think the bitcoin is

potentially a useful system which is bitcoin consumes energy in a very peculiar way which

virtually no other industry does which is that bitcoin is a geography independent buyer of energy

which is not how we humans typically consume energy like we need energy to be produced

near to population centers and we needed to be produced at the you know corresponding to the

peaks and troughs of our consumption right because we have to 100% match the demand in the supply at

all times right otherwise we have blackouts so bitcoin doesn't care about any of that it just

buys energy on a constant basis and so it's you know indifferent to where it's being produced and so

the the consequence of all that is that bitcoin will buy energy that's otherwise being wasted

basically so it will buy so called stranded energy assets that would not make it to a population

center and in fact most energy produced is ultimately does not sort of make it to you

know your your socket in your wall and so this is why so much bitcoin is 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

situan yunnan in amongolia and zhengjing 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

with our consumption of electricity it's not depriving anyone of electricity it's mostly

these stranded assets that are going into supporting the bitcoin network

so maybe let's do a last one since you mentioned china says china control so if so much mining

is happening in china how do we not uh how do we prevent nation states from controlling much

of bitcoin yeah that's the flip side of a large portion of the blocks being mined in china due

to this energy feature which i discussed which is that there's a lot of chinese miners for sure

now the question ultimately is what degree of control do miners have over the bitcoin system

right and that was part of the block size debate i mean the miners there when we implemented

segregated witness in in 2017 the miners just didn't want to do it eventually the users the

regular folks running nodes rebelled and basically said look we're going to implement this whether

or not you do it and it was a threat to the valley of bitcoin because if this threat had gone through

it could have split bitcoin and it would have been really messy so the miners sort of capitulated

so i think the current consensus is that miners do not have unilateral control over bitcoin

and that governance is more poised between people that run nodes developers and miners it's sort of

a triumvirate where neither of them has you know total control uh so that's my current model for

control in bitcoin uh i think if you asked a miner they would tell you they didn't feel that

they had sort of unilateral control over bitcoin either almost as a thought experiment can i ask

you to think about if you're if some of your predictions some of your analysis some of your

understanding of bitcoin is wrong in the in the following sense where it will not have the impact

that you have a vision for it that it will not to have the scale of impact and perhaps in terms

of value will go to zero to something very low and other cryptocurrency or other financial systems

will overtake it what would be the reason for that in your mind like why might you be wrong if

you look back at it yeah in the future what did you not understand about bitcoin that will result

in that yeah that's a great question i think for that to happen one of two things would have to

obtain one of two things that have happened for bitcoin to just be irrelevant basically

either central banks totally clean up their act and you know stop engaging in rampant money

printing which i don't expect that to happen anytime soon i mean it looks like we're normalizing

this new regime of inflation you know pro inflation just to remediate the the debt issues we have

so that would be one thing that would make bitcoin cryptocurrency much less relevant

as if everyone becomes totally assured of the soundness of sovereign currencies basically

namely the dollar like the dollar being the main one uh that it seems like we're going

in completely opposite direction with most people seem to be noticing the stirrings of inflation in

society 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

if a completely superior design for a new sort of state independent monetary system emerged

but it's really hard to even imagine how that would come to emerge and there's good reasons

to think that bitcoin uh the conditions of its launch were extremely favorable and hard to replicate

can you speak to some of those conditions why it's a unique timing wise uh moment for

bitcoin to emerge yeah so obviously bitcoin was born in the depths of the financial crisis which

gives it a nice nice historical element but that was kind of a coincidence honestly we

know that satoshi had been working on it earlier in back or in 2017 um the really special thing

about bitcoin was that it was launched anonymously by an entity that did not seek any glory or credit

for what they did and apparently never monetized it at all so they never really moved any of their

coins satoshi sent one test transaction to uh halfini who's one of the earliest bitcoiners

aside from that as far as we know satoshi never spent any of their coins so you have this wonderful

promethean quality whereby it's almost self sacrificial i mean it's like this borderline godlike

figure in terms of their restraint finds this monetary technology and releases it to the world

and pays the price they never took advantage of their filthy lucre you know they never they never

recognize any of the 50 billion dollars that they made from bitcoin right uh and satoshi also didn't

assign themselves any privileged access uh to the coins you know satoshi could have just written in

the code i own 10 percent of the coins but they didn't they just mined in the open free market

competition like everyone else it's just that satoshi is an early miner to support the network

accumulate a lot of coins for sure but they didn't have any privileged special access

so that's one thing that's extremely special about the launch is that we had a founder that

was truly committed to the monetary protocol and didn't seek either recognition or financial

spoils and then also left you know if satoshi left in 2010 2011 and hasn't really been heard from since

it's a very george washington move gangster move where he didn't want power and once he got power

he let go of it precisely that was a key actually move what one 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 uh probably if he'd wanted and satoshi could have been uh gerome powell if he'd

wanted and satoshi could have held on to power indefinitely but chose to leave the other thing

is that bitcoin circulated for a long period of time from january 2009 to about july 2010 without

really having a financial value so there weren't really any marketplaces it didn't have a value

and so that gave it this really great distribution you know among a broad set of stakeholders

and there were no venture funds or hedge funds you know trying to aggressively buy up all the

supply back then now when you have new cryptocurrencies launched they're like aggressively pre

mined and some gigantic silicon valley venture fund is going to own 30 of it and so it's sort of

impossible to conceive of how that could become a global money because how could you know a silicon

valley investment firm own 30 of the money supply that doesn't make sense that's just so

oligarchical right it's unbelievable so bitcoin by contract is a very bottom up thing it was

the early enthusiasts uh people that were you know really um excited about the technology

they're the ones that obtained those early coins and so there was a real element of fairness and

just an organic nature to its launch which would be incredibly hard to recapture today let's say

satoshi came back and they said okay i made bitcoin 2.0 i'm gonna release it there'd be the

most aggressive land grab ever by you know gigantic pools of capital to sort of get favorable

allocations of the new system right can satoshi with bitcoin 2.0 build in a resistance mechanism

or a prevention mechanism for the land grab it would be hard to because you know if you have

capital and resources i mean if it was a proof of work chain you'd just have people that would

invest a ton of money in mining for instance but most new blockchain cryptocurrencies are just

sold basically they're you know issued in token offerings kind of thing so so it's hard to enforce

through the protocol the decentralization of control yeah our it'd be challenging to and people

have tried to do airdrops you know where they you know distribute coins a large number of people

basically doesn't work most people don't care about the airdrop so it's hard to have an equitable

distribution i think the conditions of bitcoin's launch were so lucky and favorable that they're

very unlikely to be replicated so i do think it's going to be a real challenge to ever have a new

competitor that's as decentralized as leaderless as dispersed sort of distributed as bitcoin is

has its credibility i don't know how you could overrule it on those important features what about

bitcoin's comparison to other current cryptocurrency so bitcoin versus ethereum for example why is it

possible that ethereum overtakes bitcoin that's certainly possible yeah i'm not ruling it out

ethereum leadership is sort of wise enough to understand that they shouldn't compete with bitcoin

on those most profound qualities like ethereum doesn't really aspire to be more sound from

a monetary perspective than bitcoin right the in fact the ethereum leadership are sort of

constantly tweaking the monetary policy so they went for a completely different tradeoff right

they also don't compete to be as decentralized from a governance perspective right because

there's leadership there's an eth foundation there's a charismatic leader of italic and ethereum

has this policy of hard forks so in bitcoin hard forks are extremely rare in ethereum that it's

the default way to change things so it's a much more adaptive system and it changes more frequently

but that also means that it's sort of they're incurring more risk when they introduce those

changes there's much more complexity so ethereum is smart because they sort of understood bitcoin

as the top dog when it comes to a sound money a digital gold type thing and they went for all

of the different tradeoffs they wanted to be more of a platform they wanted to have more complexity

the transactional layer they wanted to take on more risk in terms of changing the protocol they

wanted to change more quickly they wanted to make the monetary policy more mutable so ethereum takes

that completely different tack of course you know not ruling out that it could take over bitcoin

from a market cap perspective it's just a very different system and i tend to think

that bitcoin is the most disruptive one because it's the most equipped to challenge sovereign

currencies in the grand scheme do you think they can coexist so like in the future is do you see a

world where you know ethereum captures some large percent of the market and but nevertheless the

minority a hundred percent a hundred percent bitcoin has already been tokenized and put onto

ethereum many units of bitcoin i think over a billion dollars worth so none of them do they

coexist they are actually mutualistic so they're like two creatures that have this you know it's

like the rhino and like the bird the pex the parasites off the rhino's back whatever yeah

right so i don't know which is which in the analogy but yeah i don't know who the parasites are

yeah or you know the alligator and the teeth cleaning fish or whatever right so you know i

always wonder why the alligator doesn't just eat the fish but uh i guess they're brushing its teeth

basically so ethereum is it gives you more transactional flexibility there's much more

experimentation happening there it has this whole decentralized finance element there's a huge number

of bitcoins that circulate on the ethereum protocol right because ethereum is open to other asset

types basically so i think that's actually a creative to both systems because ethereum gets

to have this good form of collateral bitcoin on the system which is good volatility characteristics

and then it's a supply sink for bitcoins which are sort of now they're injected into this third party

protocol and that i think reduces the velocity of bitcoin over on it's probably good for the valuation

so you see it's it quite 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 percent of ether was lost in the smart contract

or really the this smart contract that a lot of ethereum leadership were sort of backing and

supporting was hacked and then the foundation with vitalik support chose to make a change to the

underlying protocol to undo the hack right so to me that was not the most prudent approach

because you're basically violating the core protocol rules in order to undo you know to

bail out a specific contract which has failed granted there was a lot of ether in there but

i think that shook the credibility of the ethereum system that happened back in 2016 i think uh that

was one reason why i i became disenchanted with ethereum so basically even if in that case that

might fix an important problem that opens the door to centralized like 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 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

uh was hacked that you know the leadership intervened and you know to their credit they

haven't had a significant intervention or bailout since then but it did normalize the practice

and i think it weakened the social contract so i would prefer that you sort of bite the bullet

in that situation and you accept the failure of that contract there'll be a ballsy move to bite

that bullet yeah i mean and then you would have had like what they thought was a malicious entity

and control of a lot of coins i think the real reason they sort of felt that they had to undo

it was because they'd always planned to move to this proof of stake world where your political

control over the system is a function of your wealth in the system and they didn't want this

attacker which would have inherited all this significant wealth to have influence over that

future proof of stake version that's sort of my theory yeah i mean that makes sense this it kind

of reminds me of the bailout of car companies you know this is difficult there's a lot of people

that criticize the bailout of these large companies you know but creative destruction i mean 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 in the corporate sector in

japan in the 90s there's this like slow motion and solvency where basically firms weren't allowed

to fail and the japanese corporate sector lost competitiveness because bad firms did not fail

and so you know the process of actual capitalism for the market clearing didn't occur so i'm always

in support of you know of the free market being allowed to clear for non profitable firms to fail

it's complicated man because uh creative destruction seems to be in the long term a positive

but human civilization is such that short term pain has real impact on people you know

yeah 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 makers

forget politicians it sucks to lose a job for an individual you know you could say the company

you know created destruction of a company means the company was inefficient and that's going to

have a ripple effect of teaching everybody else what an efficient operation looks like

but like there's jobs that are being lost there's families that have to suffer because of that i mean

i mean that's a tension we live in society is having a basic safety net for our world

because there's a level beyond which like if through creative destruction that you have

some percent of the population that dips below a certain level that you would call like suffering

we don't want that and that's a difficult thing to live with like yes in the long term

term you want inefficiency to be destroyed and efficiency to be rewarded but there there does

seem to be a base level of like quality of life that we want to uphold that's a difficult thing

to think about i think about that a lot there's a doctor called paul farmer that you know there's

like a in hady or in africa there's a child who's dying and as a doctor you want to give everything

you have all the money you have to save that one child but there you know and you do actually but

that's a that's a very human action it's not an economic it's not a it's not a rational action

from a game theoretic perspective because there's no way you can take that action for every child

who's 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 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 or financial asset prices started to fall their reaction is okay well inject more

capital into the economy we'll save it but i my view is that these palliative short term measures

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 Dahlia point out that you have these long term debt cycles and we're sort of at the end of

one now is because we couldn't take our medicine we couldn't you know let interest rates clear

we constantly wanted to ward off any you know difficulty and we didn't ever want to

deleverage truly and then when the when the debt crisis happens and it hits it's you know horrendously

bad so do you think bitcoin might reach a million dollars in value it's uh it's having a current

resurgence a crazy one in 2021 in the recent months of over 60 000 i guess it is now do you

think it's possible it goes over 100 000 do you think it's possible it goes to a million you

can't rule anything out with bitcoin so i mean i'm not you know wanted to put price targets on it but

one way it could reach a million dollars is bitcoin's value stays unchanged in real terms

and dollar and precious dollar depreciates against it um not that i expect hyperinflation but yeah i

mean like bitcoin is worth about one tenth uh slightly under one tenth the value of all the

gold in the world and uh you know gold is worth 10 trillion 11 trillion dollars in the aggregate

do i think bitcoin can be more culturally and economically salient than gold in two decades

time 100 percent bitcoin was unknown 12 years ago and today 100 million people worldwide own

bitcoin so just extrapolate that what is the level of penetration you think we'll get 500 million

500 million a billion you know you can easily tune these adoption curves however you like i i don't

think it's done you know monetizing and being adopted globally you think it become it can become

like the base layer for a lot of our financial operation like to become the main base layer for

all our transactions so like even even banks will use bitcoin essentially and like visa would use

bitcoin as the base layer like it would actually operate very similarly at the at the surface

layer but at the base layer would all be bitcoin that's precisely what i expect and banks and visa

are already using bitcoin so visa has embraced bitcoin in a really big way actually and it's

always funny to the people saying bitcoin has to change in a certain way so it can compete with visa

no visa adopted bitcoin right paypal adopted bitcoin square adopted bitcoin obviously they're

not tearing out all of their existing infrastructure but they're totally engaging with this thing

banks have now begun they got the green light to provide custody for bitcoin for their depositors

that's the first step eventually likes you know it'll have in one of two ways either bitcoin

native financial institutions will become banks that's already happening there's bitcoin exchanges

that have gotten banking licenses or banks themselves will start to engage with bitcoin

as a reserve asset it'll converge either way that's totally happening and yes i mean i don't think

bitcoin is going to power every financial transaction i think it'll coexist alongside

sovereign currencies but i think it's a great reserve asset it's a very powerful asset to

build a financial system on top of because it's highly highly auditable it's something that you

can take physical delivery of very cheaply and those are great qualities if you're a depositor

in a bank they can prove to you how much bitcoin they have they can't really easily prove you know

in the old system how much gold they held on deposit and you can easily conduct a run on the

bank you can hold them accountable because you can withdraw it because you know making bitcoin

transaction is pretty easy at the end of the day unlike fiat currency it's like kind of

you can't really withdraw all your dollars from the bank i mean you sort of can but you're not

going to want to take delivery of pounds of cash or anything like that so it's a good modern asset

upon which to build a financial system basically you you measure square and visa sort of investing

in bitcoin what do you make of probably one of the higher profile big investments in bitcoin

which is tesla and ilan musk but there's also a few billionaires like chamath and all them investing

what do you make of this whole movement why do you think they're doing it i mean tesla is an

interesting case why do you think tesla is putting uh i'm buying so much bitcoin i honestly don't

know and i would love to truly know ilan's genuine thoughts on bitcoin um because he's kind of sending

us mixed messages honestly with his embrace of dogecoin which is sort of playful not exactly

sure what point he's trying to make there so you were involved with dogecoin you mentioned offline

a little bit in like in the early days or at least like played around with it what do you make of

dogecoin what do you make of ilan and doge what do you make of this particular meme coin is it

is it one like a legitimate cryptocurrency or is it two like a funny internet way of saying

fu to the man yeah it's it's a good question i mean so i wasn't like a figurehead in dogecoin

or anything but that was totally my introduction to crypto was mining dogecoin in my dorm room

and then tipping people online in dogecoin which i just thought was the funniest thing

so i guess i was really easy to entertain back in 2013 but it was very playful at the time there

was a culture around dogecoin and the people liked it because it was in opposition to the bitcoin

culture which was really serious and involved lots of austrian economics and rothbard and hyac and

stuff like that so that was my introduction to cryptocurrency was because i thought the bitcoin

people were pretty lame yeah and they were like way too serious about all this stuff and i was like

okay i'll just be a part of the dogecoin community and they did all these funny publicity stunts like

they paid to send the jamaican bobsled team to the olympics you know like great stuff like they

put the dogecoin logo on top of a nascar car yeah um and i just that tickled me so much because it's

like this made up internet coin this was back when crypto was pretty novel and still like kind of

funny and stuff and that was really entertaining fast forward seven eight years dogecoin is way

less entertaining now frankly because it's the leadership left the community spirit evaporated

um the meme didn't persist i mean doge itself is not really a contemporary meme right i mean it's an

old meme although that new refresh of the meme like doge haven't heard that name in a long time

like or doge is like in a hat smoking a cigarette i mean there's some sense where elon is reinvigorating

the meme and it's funny because like one influential figure could do just that which

just speaks to the tension that you're talking about like tessa is investing bitcoin and yet

elon he also tweets about bitcoin but yeah he's i mean who am i to question the meme right like

yeah i i can't you know dissect internet culture and pedantically sit here and tell you it's an

invalid meme yeah you know if if people believe in it then it's real is there a space for meme coins

at this at this time like like doge or somebody somebody else to almost like um you know there's

it does serve a lot of purposes which is like you said it pulls in people into this whole space of

digital currency and digital in uh and into cryptocurrency allow them to explore allow them

to have fun as opposed to taking everything very seriously is there still space for that yeah yeah

and i mean the crypto landscape is very broad today so whatever you know cultural element you seek

to find within crypto you will find it was a bit different in 2013 because bitcoin was kind of the

only game in town there were a couple alt coins and so doge coin made a lot of sense as a counterpart

to bitcoin as a less serious counterpart today crypto is just this like gigantic cultural and

economic trend so it's you know very multifaceted doge coin is one of the many you know ways that

people have to engage with it i think a lot of people that buy doge coin based on elons implied

guidance are going to lose money because fundamentally there's nothing enduring about doge coin it's an

ancient fork of bitcoin it's unmaintained there you know it's probably at risk actually from a

protocol perspective it's merge mined with light coin i think um if there was an inflation bug on

doge coin 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 doge coin like for lulls at least originally

like a meme coin but it's also a mechanism for investment and so those are sometimes a tension

and and it's unclear sort of like yeah you know there's the meme with doge has almost

become to take it to i guess to a dollar trying to drive the price of the value up to a dollar

but you know implied in that is like this overlap of the meme coin and like legitimate

investment and so you have a lot of young people i think who almost start getting greedy and want

to make money like as opposed to 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 can be detrimental in that sense so i don't uh it's difficult i don't know what

to do with that with that set of ideas because a lot of 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 through that process there's going to be a lot of volatility and if you're

just talking about cryptocurrency as an investment mechanism then it can have a real detrimental

effects on people's lives yeah and that's really the challenge with operating in the crypto space

talking about it overlaid on top of everything that's interesting politically or culturally

about it is the financial incentive yeah and so you know it's not all fun and games because

there are literally billions over a trillion dollars at stake now so if you buy dogecoin because

some influencer on tiktok said so yeah you've now made a financial decision right so i'm not

going to scold any dogecoin buyers or any crypto asset buyer for that matter but be aware that

there are like billions of dollars of really elite hedge funds that are trying to front run

on all of your decisions and evaluate social sentiment things like that so it's a waterfall

of sharks basically and by the way if you're listening to this uh don't take this podcast

or anything i ever say is financial advice that's definitely not my interest or expertise level

now the the interest here is to explore different ideas speaking of which you've written a little

bit about nfts i'm 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 what do you think of nfts

yeah i think the current enthusiasm for nfts and the financial metrics you see the growth there in

that sector is partially a function of where we are in the actual credit cycle so oftentimes when

inflationary events occur you have correspondence speculative manias that occur at the same time

because people intuitively feel that the fiat currency that they hold is being debased and so

they frantically look around for other places to put it so stocks property commodities and then other

asset classes nfts or an asset class and this is a case with any inflation you look at in history

you saw these correspondence speculative manias basically speculative episodes so a lot of us

feel that inflation is occurring whether it's in cpi or not 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 is the fed you know

lower 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 is 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 you know barcodes and put them

on chain so that they could be traded and so they could circulate freely on a peer to peer basis and

plugged into exchanges and things like that so that concept is super valid clearly has protocol

market fit right people are using it for a really wide array of purposes it's completely going to

exist may the valuations contract of nfts in the aggregate definitely possible probably likely but

uh but i think the notion of creating enduring collectibles or artworks that have accompanying

you know accompanying signatures basically autographed art on the blockchain

that has totally been validated i think that won't go away i wonder if there's ideas like

big clout for example i don't know if you saw that if there's ideas built on top of this concept

it doesn't have to be nft like ethereum nft it could be just the concept of non fungible tokens

whether those kinds of things could take hold and they it's less about financial transactions

and more about almost like uh i don't i don't know how to put it but like staking identity

in some way whether it's big cloud or identity of objects like there might be some way of connecting

physical reality and digital reality some interesting ways so just the financial aspect

is a way to like put some validity behind the identity i i wonder if there's like ideas there

that are yet to be discovered or ideas that yet to be take hold like big cloud seems interesting

yeah seems shady as hell seems a little scammy yeah i don't know if i like the idea that you can

bet on people essentially right yeah i think my market cap on big cloud is like 90 000 dollars

and i haven't done anything there so it's like did you take did you like take like verify yourself

or whatever i have not i think people would yell at me on twitter if i did so and it's unclear

whether it's a scam yet or not right it sounds clear where it's coming from well there are some

details about the you know investors it's it's backed by some pretty big name investors so

i probably wouldn't use the word scam to describe it but it's got Ponzi like dynamics

like everything in crypto yeah so there's very questionable and then also is using

using people's likeness without their permission which is i think a legal question you know so

there's open questions around it but you know is our public blockchains and you know that sort of

architecture is that going to be useful for decentralized or alternative forms of social

media yeah a hundred percent yes you know i'm super super bullish on that idea basically

creating open protocols uh open namespaces ways to organize without the dependence on

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 architectures are a 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 uh let me ask you about love so uh there is a bitcoin maximalist community

that uh sometimes uh so those folks in general have a strong belief that bitcoin is good for the

world and it's almost an ethical imperative to to sort of help bitcoin succeed which i think is

as a member of any community i think is beautiful to believe in the vision of the community right

there does seem to be some properties of uh what some may call like toxicity or

derision and mockery and those kinds of things um so you know uh some folks have criticized this

right that uh bitcoin maximalism is not necessarily good for the world even if bitcoin is good for

the world what are your thoughts about this kind of approach philosophically or practically to uh

the spread of bitcoin and is there a way that we can add more love to the world while we add

more bitcoin to the world that's a great question i mean i you know bitcoin is sort of what you make

of it so you can define your own path as you advocate for bitcoin or don't for that matter

so my chosen approach is the approach you see here which i try to minimize the amount of sort

of harshness or mockery although i've been known to be mean on twitter too you know what twitter

is a specific site to interrupt is a specific media where this takes 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 are like when i experienced on

twitter the bitcoin community at first i was off put yeah in terms of the intensity the mockery

i bet yeah the layers of lull like the layers of not taking anything seriously and um i think

there's power to that there's freedom to that i appreciate it i have respect for it but it's not

my thing on twitter it's just not not the way i enjoy communicating on twitter i retired from

twitter i hit i hit 100 000 followers and then i retired so i'm free now i don't have to tweet

anymore it's great but i i totally can see the point i wish that bitcoiners were gentler in

their approach not all bitcoiners are like that of course there's you know 50 to 100 million of

them worldwide and a few tens of thousands on twitter so i'm not going to claim that they're

necessarily representative the toxicity though is kind of a learned habit because uh bitcoin

has had so many episodes where strong willed institutions the dice billionaires the dice

are 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 11 yeah permutations um

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 coopt

and alter bitcoin um to shape it to their liking and without these incredibly hard

core sort of high priests of the bitcoin protocol it would have been hopeless hopelessly

malleated in all number of ways and so there is a reason why someone would be incredibly

protective of bitcoin uh does that justify immense toxicity you know on social media

probably not but it's a leaderless uh protocol so the whole point is that it's money for enemies

and you know some of the bitcoin maximalists came for me too when i made suggestions that they

didn't like um but you know i'm happy to use it the protocol because i know that that transaction

will be final regardless of how odious my counterparty is or how how you know politically

disfavored their opinions are see i i mean and this is where there's this there could be disagreements

but i i think you have to think about what's effective as a defense mechanism of strong ideas

and i personally think uh that uh like kindness and thoughtfulness and like

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 is not been technical it's been political

because bitcoin is an intensely political idea and so a lot of people are predisposed to totally

hate it and to wish you know death on bitcoiners i mean there's a professor at gw this i saw earlier

this week that was musing about getting all the bit corners on a boat and singing it it's like

in what other context would a you know upstanding professor muse about mass murder but in the context

of bitcoin it's sort of okay um you know within his peers because you're talking about something

that most people don't like you know it's the concept it's alien to them that doesn't jive

with the way they see the world and so because it's so you know pitched from a political perspective

there's a lot of critics as well as defenders that operate in bad faith i would say but that's

the nature of the beast it's because we're proposing a very disruptive thing and there are

people that would be disrupted by it you wrote a blog post titled on writing you're i think an

excellent writer uh so let me ask what does it take to be a good writer what does it take to

write some of the blog posts you've written sort of condensed set of ideas in your head

the mess that's probably in your head and putting down on paper in a way that's uh

communicates the idea clearly and powerfully so that was basically the point of the blog post

is that being an impressive writer is different from being an effective writer you know so

i think the answer to your question is humility basically so uh i think if you let pride and

vanity seep into your writing then you risk uh creating a very noisy signal you know creating

a very inefficient channel for communicating literal neural arrangements from your brain to

someone else's brain and that's what i think about when i write it's like wow i have the power to

at scale change the literal physical composition of people's brains right to rewire them if i make

an idea that's so persuasive that's so sticky if i coin a phrase that is so pithy then i can alter

their brain that's crazy i mean you're letting someone reach into your head and like mess with it

a little bit that's unbelievable and that's like a superpower and if you could do that to a hundred

thousand people at once how powerful is that right and you mentioned to cart i think therefore i am

that's like literally rewired millions of brains throughout history right i mean that's one of the

most powerful like kogodo urgo sum one of the most powerful phrases ever written and that sent

zillion philosophy undergraduates on a rabbit hole of skepticism that some of them didn't make it out

of you know and they're convinced that you know with the brain in the vat theory is true and

there's no way to know you know what are tangible experiences 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 chill off our our vocab and stuff and that's that was

the point of that piece is that i went on this journey where i eventually realized that i don't

know if i'm any better of a writer for having realized it but i think that is a necessary condition

so does that mean there is a value to striving for simplicity in the words as opposed to um

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 read 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 um 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 listened 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 the beauty and power of like

like complex weaving of words without assigning as much value to like actual clear communication

of an idea um and i'm always skeptical in speech as well when someone will describe someone as

articulate i'm always immediately skeptical of the value of what that person is saying uh because

if you articulate you can make bad ideas sound very acceptable and great and norm chowskis

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 shine through there's something to

that there's something to that 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 books or resources on

bitcoin now from you and from others that you can recommend that were in your own journey helped you

or you've seen help others well it's very easy i mean it's much easier today to make the bitcoin

journey because the quality of content is so much better than it was when i started i mean

when i learned about bitcoin there was the bitcoin wiki and the bitcoin stack exchange

and the subreddit and that was kind of it and uh you had to just pick up everything and the economic

theory hadn't really been worked out very much so you had to pick everything up from scratch

the good news is that there's a huge abundance of content and that's actually one of bitcoin's

greatest strengths is that people are totally inspired to write about it and it's almost a

rite of passage at this point if you're like a bitcoin thinker to have your book i don't have a

book yet i would love to recommend my book i haven't written one do you think 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 in you uh eventually like a like a bitcoin book i mean i tallied up

the words that i wrote in the last couple years on bitcoin it's like over a hundred thousand words

a year so that's two novels there um but yeah i think i do 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 it should be done there's a lot of bitcoin histories that haven't been written

there was a great bitcoin history recently published that's this is one of my recommendations

is on the block size war by uh jonathan beer uh who runs probably the best research desk in the

industry um so there's huge amounts of history that has transpired that hasn't been chronicled

and some of the accounts are indifferent you know they're often written by outsiders

you know journalists that maybe don't fully engage with the bitcoin system but if you think

the humans are interesting in the story too of course they're the most interesting thing

you know i mean bitcoin itself doesn't really change that much it's kind of this cold you know

protocol that just sort of takes along but the characters are just fascinating i mean and there's

so many unbelievable characters in the bitcoin story unbelievable yeah that's the cool thing about

bitcoin and cryptocurrency and just internet is like the weirdos the brilliant weirdos like

all the people in uh in the stuff that's already established are boring like economics professors

are all boring right but the interesting people the wild ones are are the ones that are innovating on

in the crypto space which uh is you know that's where the dangerous weirdos are and the exciting

brilliant weirdos well you had to be kind of crazy to adopt bitcoin and in the first sort of five

years of its life so there's an adverse selection element there i don't know if that's an uncharitable

way to put it but like some of bitcoin's earliest evangelists are not the evangelists i would have

chosen but they were the ones that we got so it's the one we got but is there uh is there

resources you're basically saying just throw a dart and most books are going to be good

or is there something that's out to you i mean your average book is you know terrible for sure

but uh not on bitcoin specifically but just in general um it depends whether you like the computer

science the economics or the history but my recommendations would be you know obviously the

bitcoin white paper that's uh and satoshi's uh complimentary writings that's very important

is to try and understand the intentions behind the system and also to understand the system

without having your view colored by some third party's description of it most descriptions of

bitcoin are really bad uh so the just go to the originals go to the howlfinney's 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 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 safedine's view of monetary policy

bitcoin makes a ton of sense you know i actually need to argue for it that much

so the bitcoin standard is a good introduction to sort of the orthodox thought in bitcoin

um there's a more recent book called layered money which i liked um by nick batia which goes

into more depth about what i was talking about earlier in the conversation the layered approach

to scaling and that's a really critical thing to understand then technical books about bitcoin

i like grokking bitcoin uh which is a very computer science heavy one there's a good

textbook um called uh bitcoin and cryptocurrency technologies um by uh arvind noranian i think

he's um a princeton 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 yon 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 you're you're writing and your book that comes out

about this year or next year next year i think i'm gonna need 18 months okay uh but you know

the most of the good bitcoin content is just online on medium on twitter so um it's it's a

decentralized you know consensus kind of thing what about the book recommendations that you

could give people love these outside of the world of uh crypto that maybe had an impact on your life

fiction like sci fi maybe technical philosophical is there something you would recommend that people

might read i really liked the three body problem but that's a really hackneyed recommendation

but it really made me think and i like the hard sci fi you know the commitment to

science and science fiction so i thought it was very clever is there one uh is there something

that really annoys you in terms of the opposite of hard sci fi like that doesn't get stuff right

movies are 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 there's

an impossible to comprehend like um uh christopher no one's latest film oh yeah you needed like a

spreadsheet and i understand that tenet yeah i trust that maybe he was consistent about the

rules of his universe i just did not understand it yeah at all in that sense i i really probably

one of my favorites is uh 2001 space odyssey it's so obviously it's many decades ago but

it's quite brilliant in both its consistency and the depth of thought put into like what the

technology would actually be 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 cubrick is

is regarded for what he is what advice you've taken an interesting journey through your life

uh you've you were at fidelity your philosophy major uh you're now uh one of the seminal minds

in the world of bitcoin and cryptocurrency who the hell knows what the next five ten years looks for

you if you were to give advice to somebody uh young today uh you know making their way through

life making a career what would you uh what kind of advice would you give see the problem with advice

is that in a world where so much of success is defined by luck and serendipity is that the

advice givers often don't know why they've been successful right and so 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 successful yet but um see that's the problem is that I don't think my journey is

replicable necessarily so um you know who am I to to give advice although the one thing I will say

is that the thing I did right was to become completely obsessed with um a domain I found

really interesting and held promise like if I had been really interested in like magic the

gathering I wouldn't have been able to like do much with that aside from build like a killer

you know card pack or whatever um and I wasn't afraid to you know really put myself out there um

and you know float my thoughts online and see how people reacted to them even if I said stuff that

was completely erroneous or wrong all the time the rewards to writing and just publishing content

are immense as you know obviously it's the most high leverage activity I think most young people

have available to them um and I was very lucky and I benefited from a lot of favorable coincidences

a lot of people that took a chance on me um and if I had more time I would sit here and name them

but uh is there something you in your actions that made you more open to the the benefits of luck

sort of uh you know luck can bring you a lot of positive and negative things

so saying you're lucky means you are able to ride the wave of whatever positive stuff luck

bring brought you well that's right you have to put yourself in a position to be lucky and most

people don't so you just have to get as many shots on goal as possible and of course luck is

plays an undeniable role in any career path for sure but you do have to make yourself available

to it um and you have to take a ton of chances um but yeah that's the problem with advice

it's just so hard to replicate it so I 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

uh I find a huge amount of meaning in what I do um I find it beautiful I feel very lucky

and blessed to be in the line of work that I'm in uh you know to have your hobby and your passion

and your job just be a completely integrated thing so that's where I find meaning but you're

just a bag of like cells and bacteria that eventually dissipates dies and it goes into

the ground and disappears back into the universe I mean that doesn't make any sense

well that may be true but uh I find the sublime in things like bitcoin I find it incredibly

inspiring to work on it I believe it's a hundred year plus project and uh you know it stirs those

aesthetic emotions in you as I'm sure your work does so you find it beautiful absolutely absolutely

and and inspiring more than just beautiful so you have hope for human civilization

and bitcoin as part of that hope yeah it's a very optimistic view and people accuse us of being

pessimists and saying that we are you know rooting for the collapse of civilization completely false

um bitcoiners are complete are wildly optimistic because they believe that you can monetize a

completely new system from scratch and compete with the strongest superpower and the military and

the dollar and everything that goes with that that's the craziest most ludicrously optimistic

proposition imaginable so I think bitcoiners are the most optimistic people out there

I don't think there's a better way to end it on that hopeful vision of human civilization Nick

I've heard a lot of amazing things about you I was binge watching your interviews binge reading

your blogs fell in love with your work you're a good dude uh inspiring brilliant thank you so much

for wasting all your valuable time with me today my absolute pleasure thanks for listening to this

conversation with Nick Carter and thank you to the information athletic greens for sigmatic

and blinkest check them out in the description to support this podcast and now let me leave you

with some words about freedom and beauty from 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

or 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 for joises but still the place where

you live is that much more drab and empty for their departure thank you for listening and hope to see

you next time you