CD143: BITCOIN CONSENSUS ANALYSIS WITH STEVE LEE AND LYN ALDEN

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Created: 11/11/2024 22:46:13
Duration: 5159.230
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Bitcoin is hitting new highs above 80 actually above 82,000. And Mackenzie

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Tagalos joins us now with a look inside the ice. Was there ever a time, Mackenzie, where you said,

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why am I gonna be a crypto expert that's a big risk? Now look at you. Now look at you. We can't get we can't get enough of you. 82,000.

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Yeah. I know in 2017, I was talking to Bitcoin miners in Venezuela who were doing it to make ends meet. But now Bitcoin topping $82,000

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this morning.

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As futures premiums jump higher, traders are now betting over $2,900,000,000

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on Bitcoin soon rising past that 85 k threshold

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on the popular derivatives exchange, Derabit. The wider crypto market also seeing out sized gains this morning. Ether has eclipsed Bitcoin's rise up 30%

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in the last 7 days, and Solana's market cap topped a $100,000,000,000

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level on Sunday on the back of US elections that saw a swell of pro crypto candidates win office. Now the total market cap of all those spot Bitcoin ETFs is now above $80,000,000,000

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with inflows surging in the last 3 trading days as institutions and their clients pile into the Bitcoin trade post election.

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Within Fintech stocks, crypto aligned companies, Coinbase and Robinhood,

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both of whom are in legal fights with the SEC are moving higher pre market, and most Bitcoin miners are all seeing double digit percentage gains as well. Donald Trump, remember, promised that all future Bitcoin will be mined in the US and pledged to rapidly build out the country's energy production and transmission infrastructure, which is a great thing for those power hungry miners. This is one of multiple commitments made by the president-elect to the crypto industry on the campaign trail along with vowing to fire SEC chair Gary Gensler

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and to launch a national crypto stockpile.

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Just looking at micro strategy and thinking about 50,000,000,000.

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No. But thinking about Michael Saylor in all along,

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what his viewpoint has been and how he he wasn't shy at all about and he really he almost in real life has his laser eyes.

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Almost in real life. What? But the stackers and the hodlers, they must be

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at this point, anyone who has been stacking or hodling

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is on top of the world. Oh, absolutely. Micro strategy was a first mover in terms of adding Bitcoin to their balance sheet, and that's why this national crypto stockpile is so compelling. So, essentially, the US government has $16,000,000,000

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worth of Bitcoin already on its balance sheet that it has amassed through these seizure operations.

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But what Donald Trump is talking about doing is not only holding on to that, but he's also been talking to senator Lummis and her team who put forth legislation to buy 1,000,000 Bitcoin over the course of 5 years so that ultimately you get a supply of Bitcoin held by the US government that is in, you know, tantamount to what we have in gold reserves. 5% of the total Bitcoin supply. So it's just it's just you're even seeing the US government potentially leaning into this huddle strategies you were saying. Well, either you're

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just really excited about your job or you're orange pilled, one of the other. I I can tell how quickly you talk and how much you know about this. So you eat it up. Do do you not? No. I do. And I think that I think that especially that promise to fire SCC chair Gensler on day 1 in office is why you're seeing stocks like Coinbase and Robinhood do so well. Because you've got Coinbase that's been fighting the regulator for over a year in court. You've got Robinhood that has a Wells notice in May, so it may not materialize in an actual lawsuit if you see a change of leadership at the top of the SEC.

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So it's a lot of these stocks are optimistic about what a Trump presidency might mean. I saw Anthony who we had a

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a fun show on on Friday with with the Mooch, and he's mad at Elizabeth Warren. And he he took it out on her again, and it was tweeting about her

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with her anti Bitcoin stance

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being part of the,

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not really the election losses, but being at least involved in in taking her to task. But, I mean, that's what's been so incredible. You should think there were a lot of things. There might have been a lot of there might but among other things. North of 280 pro crypto law makers elected to congress, and you saw, what, $250,000,000

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raised by the crypto industry this cycle, that money was effective.

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Happy Bitcoin Monday,

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freaks.

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It's your host Odell here for another Citadel Dispatch.

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The interactive live show focused on actual Bitcoin and Freedom Tech discussion.

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We are officially back at open water Bitcoin.

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Pump it right into my veins.

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I always forget how it feels. It feels amazing. It's good to be here with you all. We have a very important topic today.

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We will be having heavy price discussion. No. I'm kidding. We will not be having heavy price discussion, but we will be talking about

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Bitcoin consensus

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and how

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Bitcoin,

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works at the protocol level in terms of any potential changes

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or no potential changes

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going forward.

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I have 2 of my good friends here to join us. But before we get started,

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that intro was,

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a clip from the largest Bitcoin podcast in the world, CNBC's Squawk Box

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that broadcast every morning. Our boy, Joe Kernan,

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reminding the world that the Stackers and the HODLers are in charge,

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and they are all just following our lead.

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So with all that said,

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we got Steve Lee here,

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Bitcoin lead at

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spiral,

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blocks,

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formerly Square's,

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open source development

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division. How's it going, Steve?

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Really, really good. Thanks for having me. And it's kinda funny after,

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2 or 3 years, we still have to

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preface what block is.

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I'm just I I have to say just to just to show I do too. I I do as well.

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And we have

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first time guest on sale of dispatch. It's been a long time coming. I can't believe it hasn't happened yet. We have,

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partner at Ego Death, founder of Lin Alden Investments,

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and a recently published author,

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with her broken money book. And she's about to release a sci fi book that she's been teasing on now, sir.

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We have Lynn Alden here. How's it going, Lynn? Pretty good. Happy to be here finally.

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Cheers.

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It's a pleasure.

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So we will be talking about

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Bitcoin consensus. You guys just released

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a paper on this.

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You did a lot of work doing a research paper.

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Steve, where do you want us to start? What do you what are you thinking is important takeaways here? Where do you want this discussion to go?

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We can start really high level,

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what this project is, what what motivated us to start it.

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Also, I think we'll talk about what what it is not.

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So how about I start with that? So,

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you know, what is what is this project?

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We felt it was important for

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we felt like one motivating factor is that there's very there's we got a sense that there's very little understanding of,

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2 fundamental things.

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First, Bitcoin's really hard to change. And what makes it hard to change? Like, why does it?

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A lot of us invest in Bitcoin or work on Bitcoin

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with this underlying thesis

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that it's not centrally controlled

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and it basically doesn't change. What actually keeps that intact? So that's one question. And then the flip side of that is,

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if we,

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the broader Bitcoin space, wants to change Bitcoin, improve Bitcoin,

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what does that look like? How does that happen?

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And what are some inherent risks with

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various mechanisms to pursue that. So this project

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attempts to

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observe and describe

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how,

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how change is

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prevented,

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and then also

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how it has happened in the past.

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And then it goes through one exploration for, for future considerations of how it could happen,

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in a in a risky way. It's sort of a cautionary tale,

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that, you know,

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a a mechanism that we'd want to

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avoid. So and it's it's also important to point out this is an open source project.

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A few of us came together

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to start it, to go from concept to a good starting point, but that's exactly what this is. It's a starting point. It's not the it's not the end.

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And so we've had a couple dozen people in the space

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for with different perspectives on Bitcoin,

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ranging from miners to ETF issuers to protocol developers to

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media influencers

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who have reviewed it. And now it's open source so anyone can contribute and we'd very much welcome that.

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Awesome.

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Do you have, like, a convenient

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to share URL or is it just hosted on GitHub?

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GitHub is the

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canonical place to go. Okay. So I'll I'll call it convenient, but it's get github.com/bitcoin

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dashcapcap.

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There we go. Yeah. I guess it's not that bad of a domain. Well, we will,

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we will link it in the show notes.

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Lynn, what is your high level thoughts on this,

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on this paper?

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My view is that what's interesting about consensus is that how consensus is achieved changes over time. So it's not like trying to analyze a static thing that's always been a certain way. It's that it changes over time. So when when when Satoshi was around, you know, consensus changed one way, mainly him updating

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it. Then as as the network grew larger, it updated in different ways.

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My first article on Bitcoin was in 2017 during the block size war, basically, when that when that was kind of unfolding. So kind of seeing consensus in action,

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was pretty interesting.

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And so for me, the the high level takeaway, I think, is that consensus is probably has more moving parts than people think

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and that we can't a 100% rely on the past to dictate what future consensus either opportunities or risks look like because the field does at least gradually shift over time as there's new types of entrants or as as power shifts around a little bit.

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Bit? Yeah. I mean, it's

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it's kind of like, people think of Bitcoin as

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a, like, a software project,

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you know, this open source project, which it is.

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But it's also,

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like, this movement of individuals. There's all these individuals and different stakeholders.

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And, obviously, they those stakeholders

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grow over time unless Bitcoin's a complete failure. More and more people are adopting it.

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I mean, obviously, we saw the ETFs,

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launch

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this year. Also, I mean, this is

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Michael Sailor's well, Michael Sailor just has his first having.

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So for, like, newcomers, they're like, oh, Michael Sailor is, like, the leader of Bitcoin.

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He's relatively new in the scheme of things.

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So we've had a lot of new entrants, pension funds,

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presidents of the United States,

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you know, all over the place.

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So it's I think it's almost

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it's it's almost more helpful to think of Bitcoin almost as, like, this living organism because there's all these different constituents that are, like, constantly coming into it.

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Agreed. And that's also why

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we we don't wanna look at this as, like, a paper

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that 3 people

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writ wrote and published, and then we move on

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and people can read it. It's instead it is a it's a living it's a project, and it's a living project.

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We just happened to start it. But we're hoping that 10 years from now or more, it's still it's tie it's a timeless project and still can help be a valuable,

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you know,

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resource within Bitcoin.

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And and maybe I I didn't speak to what this project does not, and I think it's important too because because it touches on such a controversial spicy topic of

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of change and not change. Right? So we we've had large we're actually pretty happy. We announced it on Thursday. I spoke at an event Saturday in Boston,

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talking about it along with our,

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coauthor,

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Wren.

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And,

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and overall, the reception's been quite good. We're we're really happy. But, you know, there there's also some people reacting

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saying that,

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you know or or, like, concerned that it's going to, like, incur it's, like, a pro change

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project.

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And I've actually and then, like and then there we'll we'll go through some of the things we we talk about in the project, but, you know, there's been people,

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not liking that were saying alternative

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Bitcoin implementations

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are like an important option in Bitcoin. And and we've heard the flip side,

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you know, so

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what what this project is not, no number 1 is it's not taking a position

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on

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changing Bitcoin. It's not taking a position that we should ever change Bitcoin or with the pace of change in Bitcoin, specifically with respect to consensus rules, not taking a position there.

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It's also not

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attempting to be a blueprint

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for how to change Bitcoin or what Bitcoin consensus should be. It's just trying to observe

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how it has worked, currently works, it might work in the future.

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And it's also not

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advocating for any particular

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change. Like, there's several consensus proposals that are being discussed in within Bitcoin right now.

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It's not taking a position or championing any of it.

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I think that's a good disclaimer. The topic in general about how Bitcoin

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changes is a quite taboo topic after 2017,

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and the very

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hostile tension filled dynamic that played out during that period,

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which is one of the reasons why I was happy to,

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have this conversation on dispatch because I like the more spicy things.

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But, yes, there's definitely a subset of the community

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that probably just immediately see this and think of it as an attack on Bitcoin.

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I think I think the overwhelmingly

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a large portion of the research paper

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is basically just, like, outlining

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and trying to define,

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characteristics of Bitcoin and just providing, basically, a primer, which I think can be very helpful for people that are relatively new to the space. I mean, historically,

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trying to understand

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how the protocol evolves over time and and and changes or doesn't change in particular situations basically took proof of work. It took, like, time and space. Like, you just had to be here and live through it.

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And it's it's hard for a newcomer to come here and understand it, and there's a reason like, every good meme is based on reality. There's a reason there's a meme that's you know, I'm new to Bitcoin, and I'm here to fix it, because it happens

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very, very often. You see a newcomer come in, particularly someone with deep pockets

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that buys a lot of Bitcoin,

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decides that they're gonna try and impose their way on Bitcoin. And I think

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this type of research and definitionally

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wise, like, all the different things that you guys outlined in the paper

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kind of preempt that to a degree. It's like you send them this paper and let them read it first so they're, like, not coming in on a blank slate. Before we continue, I just wanna shout out the freaks who have supported the show

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in our Nasser enabled live chat, which you can get at rhr.tv/stream.

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We have Kibo who zapped us 21,000

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sats

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saying Bitcoin is hope. We have The Great Gazoo

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who also zapped us 21,000

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sats.

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I think he's advertising,

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his

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vinyl livestream on zap.stream

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called Papoosh

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Radio 73100.

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CIL dispatch is a pure value for value show. We have no ads or sponsors. I try and do everything the hard way to make my life more difficult,

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and I try and practice what I preach.

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So this is the result of that. If it wasn't for you guys,

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continue to support the show. Dispatch wouldn't happen. So thank you, guys.

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So, I mean, let's let's go high level first. I mean, do you

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I

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I I

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what are your so so so this idea that,

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I guess, I'm kind of coming from the perspective

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that I think it's it's pretty much impossible

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for there to be any kind of real contentious

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Bitcoin soft forks in our future. I've kind of feel like that period has passed.

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I mean, Steve, we'll start with you. I'm just curious on, like, your opinion here. Like, do you

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I I kind of I I kind of think it's almost like a moot point

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in terms of a lot of these proposals. Like, I think it's kind of just people spinning their wheels in terms of different software proposals right now because it seems like they're so far away from any kind of broad consensus

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on changes

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that they're

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probably

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unlikely to happen.

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I generally agree. There there's several trends that we can observe

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that have made it harder. I mean, first of all, Bitcoin is just bigger than ever. Any metric you pick, price, number of adopters, number of businesses, number of, you know, podcasts,

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whatever metric you choose. It's 10 x bigger than 4 years ago.

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And just with

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more of everything,

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it's harder to coordinate,

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a chain. It's it's harder to to get consensus across 10 times more people, a 100 times more people.

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It's also harder to measure consensus.

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I mean, Lynn alluded to it earlier, which is, like, originally, it was just Satoshi,

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and Satoshi could make a change, and that was consensus. He just pushed the change.

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Obviously, it's much harder now. So for that reason alone, I think it's

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I

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I

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agree.

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That I still think,

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I

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mean, there's changes that we there's there's one change we have to make,

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when we're sticking a bug that happens, like, when we're gonna be dead, but someone's gonna have to fix it before,

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you know, if we want Bitcoin to work after the year 21100.

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There's other bugs in consensus,

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and there's a change great consensus cleanup,

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which fix fixes a number of those bugs. In theory, we could live with those

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and just take the risks. There's risks associated with them.

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My own opinion is we let let's fix those.

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But there's still software development work being done to to really get that prepared to its

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bulletproof and ready.

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But in terms of, like, adding new features, yeah, it's it's much harder. But there's there is more noise than ever,

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in terms of I mean, there's I shouldn't call I shouldn't just say noise. There's more

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talented software developers than ever exploring ways to improve Bitcoin

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in, you know, well intentioned ways.

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In addition to that, there's more noise than ever to get those changes in.

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And a lot of those different proposals, they they overlap, they do similar things,

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and it's extremely difficult

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even just within the protocol developer community to get consensus on like, yes, we want to change, and it's this option, not the other 7 that are similar. And and I'm referring to the covenants category.

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Right.

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Having said that,

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during the show, we should talk about the a

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soft fork scenario that we explored pretty deeply in this project, and we should definitely talk about, which is where,

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you can have

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relatively small consensus, a relatively small group of people attempt a soft fork and make strong progress towards it. So

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we probably wanna talk about the 6 stakeholder groups first before we jump into that, but let's definitely, on that show, go through that scenario just so I can we can have that conversation. You can poke at it and just so the audience hears it. Well, yeah, let's break down, first of all, the difference between a soft fork and hard fork, and then let's break down the 6 stakeholder groups.

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Sounds good.

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And either of you can

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who wants to lead on that?

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I can I can do it? So, basically,

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soft fork is when there's a backward compatible change,

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in general,

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and the rule set continues to function with the older nodes.

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That's historically how Bitcoin has has changed. A hard fork is when,

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the rules are not backward compatible anymore. So the the block construction or the types of transactions are rejected

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by existing nodes, and therefore, you you fork the network into 2 truly different sets of coins that share a a similar history, but then will diverge from that point.

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And so for an example of a hard fork was the Bitcoin and Bitcoin cash split,

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back in 2017,

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whereas an example of soft fork is Taproot or Segwit,

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things that, update Bitcoin in a in a

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backward compatible way.

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And for our our 6 kind of stakeholder groups, we were trying to define,

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what are the different sources of power in Bitcoin,

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and

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how do they wield that power. So we basically

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you know, you could you could make an argument

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for 3 stakeholder groups or 7 stakeholder groups. And we we landed on 6, and there was kinda discussion that went into that. And there's a pretty specific reason for it, which is that we define the stakeholder groups as being sufficiently different if they, you know, they have a power and an incentive to use that power. And if one or both of those variables is different, then they're effectively a different stakeholder group. Whereas,

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even if they're somewhat different,

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if they have effectively the same type of power and the same incentive to wield it, then they're, for most intents and purposes, kind of part of the same stakeholder group. So we landed on 6 after a lot of internal discussion for the this initial framework,

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And those are,

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investors, so,

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you know, sizable holders of Bitcoin or even just many many numbers of smaller,

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investors.

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Another one is economic nodes.

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So that's nodes for exchanges

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and payment processors and brokerages.

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Basically,

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economic nodes that do a lot of volume, and therefore,

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what what version of the software they're running is highly relevant.

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Then there's miners, of course,

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in terms of,

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you know, adopting new changes or not adopting new changes and and what they include in a block.

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Then we have media influencers.

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Basically, anyone that is, persuasive

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and has an audience in the Bitcoin space. And, of course, you know, an entity or a person could be part of multiple of these categories. You can be an investor and a media person. You could be an investor and a miner.

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And then the last two categories are 2 different types of developers. We have protocol developers, people that work on, Bitcoin Core or in theory, alternative clients and basically the the the core underlying software that underpins the network. And then we have another group, which is,

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application developers,

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that are building things like wallets or,

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you know, alternative layers and and, building other things that,

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can connect to the network or or optimize the network. And the reason we split those up is because they they could have somewhat different incentives,

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regarding Bitcoin.

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Yeah. That all makes sense to me. I I mean, I think it's a key aspect here is that there's a lot of overlap. Right? There's a lot of individuals and organizations that

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fill multiple stakeholder things, which just makes it

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even a little bit more messy

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than it would be otherwise. Including people on the show. Right?

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All 3 of us

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in invest

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in different capacities, and, you know, the 2 of you have large audiences,

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media influencers,

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you know. So there's yeah. Many many people and companies

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can overlap or touch on multiple,

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stakeholder groups. But as Lynne mentioned, that's that's not our we're we're defining it as the the separation, like, the distinction of power and incentive.

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Right.

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Okay. So, Steve, this is your show. What is what do you think is the most productive,

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next step in this discussion?

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Yeah. I mean, there are several sort of well,

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what novel in we think novel insights are and and they can get spicy too. So we can just I don't think I think there's a particular order, but we can we can start tackling those.

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Maybe one is, you know, Lynn mentioned one of the groups' economic nodes. And something,

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Matt, we we chatted about beforehand is, like, that there's a I think there's a notion among a lot of Bitcoiners that,

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if you just if you run a Bitcoin node, it's like it's it's your rules. You can't change my rules. Right? And and, I mean, on the safe on the face of it, of course, that's true. Like, if I'm running Bitcoin Core in this laptop I'm on right now, it's the software is running on my computer. I'm in control of that software.

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So I can download the latest version of Bitcoin Core and run the those rules. And those are the rules that basically everyone else is running. But I can modify those rules.

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I have self sovereignty there. I can do it. No one can stop me from changing their rules.

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Or you can choose or you can choose not to update. Right? Bitcoin yeah. Yeah. If if Bitcoin Core

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changes consensus rules, I can choose not to update that software,

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or just, you know, manually

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roll that back, but keep keep,

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you know, updating, but,

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remove that change. So, yes, it is certainly true on the face of it that each individual in Bitcoin who's running the Bitcoin software,

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they unilaterally choose which rules they run.

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But on the flip side, of course,

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is that you're only in control of your own node. You can't control everyone else's. So if everyone else does

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change the rules

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and you don't,

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then

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it well, it and, you know, and then it gets it it it depends on which type of fork we're talking about. But if it's a hard fork, then you're gonna be off. It's gonna be a chain split. You're gonna be off on a different network and a different coin. So, yes, you have that power to do that. But if literally the rest of the world forks off and you're not on that network

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and everyone else in the world calls it Bitcoin, then you did you were powerless in that extreme example.

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And I

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mean, just just to add here,

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the whole point of soft works is that if you don't update it in in a soft works scenario,

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you can you're still you're still part of the consensus of the global network. You can still, you know, participate in the system without updating it, which is a key aspect to soft works versus soft hard works.

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Correct. And that's that's an advantage of softworks. It it is,

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it's complex, though. And so

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in in a in a few minutes, we'll go through a scenario where,

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we'll go through a specific type of softworks scenario,

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in which what you just said, the whole still holds true, but the it still doesn't mean there's not risk,

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in in

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and and that fragility cannot,

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you know, be be the case with with a a soft work as well. But the flip of that is also true. If I if I'm running a note on my computer and I change the rules, I

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like, I didn't that doesn't mean anything for the rest of the network or other people. I have to convince them to update the rules if that is what I think Bitcoin is. So

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the the b cap analysis,

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you know, the the category of economic nodes,

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as Lynn mentioned, it

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it implies

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I mean, the more

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volume

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done by a node,

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meaning

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Bitcoin

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sent and received,

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the more powerful it is

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within that category.

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So if I'm just running Bitcoin Core on my laptop, but literally don't even have a wallet with I don't even receive coins,

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that's

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basically inconsequential.

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It really doesn't matter.

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So whereas if you're a super large exchange

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and you're doing 1,000,000 or tens of 1,000,000 of dollars of or more of volume per day,

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it is a much bigger factor

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when it comes to defining Bitcoin.

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But,

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I mean,

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I we're gonna have to just we're gonna

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this is gonna be a very fluid conversation. I'm excited for it. But, like, in 2017

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in 2017, what happened was we had

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there was 2 elements of 2017.

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Right? So we had Bitcoin Cash, which was a pure hard fork, right, with replay protection. So at that point with Bitcoin Cash, when it forked in, I think, early August,

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if you were holding Bitcoin at that point, you had an equivalent amount of Bitcoin and Bitcoin Cash. It was 2 distinct so the the chains had shared history in the past,

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but going forward, they had diverged history.

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And you could

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keep both if you if you just wanted to sit there or if you're in a coma or something or you could sell 1 or the other.

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And then later that year, we had sega two x,

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which died on arrival because there was a a bug in the it was an off by 1 error in the code.

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But Segwit 2x was led by

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pretty much every major company at that point in time. Almost every major company at that point in time supported Segwit 2x, and they controlled,

402
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the overwhelming majority of economic nodes. And Segwit 2x

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proceeded to fail,

404
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and the status quo remained.

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That's true. So

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my statement about within the economic node category,

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how much volume you do matters,

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that shouldn't be interpreted as, like, they're the they're the ones in charge. It's not like Coinbase is in charge or Cash App's in charge just because they do a lot of volume. It's just within that category,

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Coinbase or Cash App have more power than me running Bitcoin

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on my laptop

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within that role.

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Yeah. I would also I would also add that, Segwit two x was a

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a a hard fork,

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and we we identified in the paper,

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and we're not the 1st to identify this, is that in in when you have a soft fork versus a hard fork,

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different levers of power matter differently. So in a hard fork, investors are very impactful right away because you can sell the coin that is out of favor that is, you know, generally gonna be the the one that's the hard fork, but in theory, you could sell the incumbent. But you can sell whichever coin you don't agree with, and that is very impactful very quickly.

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And even with futures market, you could you could

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affect that even before the the split happens and therefore affect which one is likely to win after the split. In a soft fork,

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at least for quite a while, investors are notably less powerful

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because,

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they they have they don't really have that lever to pull unless they decide they wanna get out of the network entirely. They're not really just deciding whether or not the the new soft fork is likely to be,

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adopted or not.

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And so

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I think Steve's point about economic notice being relevant, especially in that category,

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that would be a somewhat different scenario than Segwit two x. So I think what we learned from the whole Newark agreement

426
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and that whole era is that, you know, trying to push a hard fork change

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that users and and, you know, the the the broader network doesn't like is obviously very hard to do. But in theory, they could they might have had more power, for example, if they got together and decided they like the soft fork. It could have been a different scenario or different,

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chance of of likelihood of success.

429
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Yeah. And then if we look at 2017,

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00:32:50.700 --> 00:32:53.280
well, first of all, I don't think any of us know exactly

431
00:32:54.060 --> 00:32:57.680
what all the factors were that led to the

432
00:32:58.144 --> 00:32:59.605
failure of Segwit 2x.

433
00:33:00.705 --> 00:33:01.524
But, certainly,

434
00:33:01.825 --> 00:33:04.404
one of the components was in the fall of 2017,

435
00:33:04.865 --> 00:33:07.845
Bitfinex ran a futures market with the 2 coins,

436
00:33:09.424 --> 00:33:11.924
you know, Bitcoin and Segwit 2x.

437
00:33:12.280 --> 00:33:21.500
And if my recollection is correct, it was something like a 10 10 to 1 price difference between the 2. And so that that that's a and we did look it up. The the volume

438
00:33:22.040 --> 00:33:26.220
the the trends the the volume there was not as large as maybe I had

439
00:33:26.520 --> 00:33:30.815
thought. So it's it's not clear how much influence it had

440
00:33:31.674 --> 00:33:38.495
or or, like, or, like, how representative it was if the volume was relatively low, but it was it was a real thing, and people paid attention to it.

441
00:33:40.080 --> 00:33:43.700
And that was certainly a signal for, like, what what the market was thinking,

442
00:33:44.559 --> 00:33:48.900
what Bitcoin is and should be, which is the original rules, not Segwit 2x.

443
00:33:50.400 --> 00:33:52.179
There's also earlier in 2017,

444
00:33:53.105 --> 00:33:53.765
a UASF

445
00:33:54.545 --> 00:33:55.045
movement

446
00:33:55.585 --> 00:33:56.805
and a lot of UASF

447
00:33:57.345 --> 00:33:57.845
discussion

448
00:33:58.785 --> 00:33:59.605
on Twitter.

449
00:34:00.225 --> 00:34:02.325
And if I recall correctly, Litecoin,

450
00:34:03.825 --> 00:34:04.645
did a UASF.

451
00:34:06.800 --> 00:34:15.620
And I I I definitely hear from a segment of Bitcoiners saying that, like, that was the reason. Like, the the user movement, UASF, saved the day from

452
00:34:16.000 --> 00:34:20.100
a 100% of you know, 95% of Hash rate, 95% of exchanges, etcetera.

453
00:34:21.945 --> 00:34:23.085
I I think the

454
00:34:24.105 --> 00:34:25.725
the the media influencer

455
00:34:26.265 --> 00:34:27.885
part of that was powerful.

456
00:34:28.425 --> 00:34:31.245
It was it it like, the people yelling and screaming

457
00:34:32.185 --> 00:34:33.805
were very powerful in 2017.

458
00:34:34.505 --> 00:34:36.925
But again, like, if you're

459
00:34:38.019 --> 00:34:39.880
if if you're just a a small

460
00:34:40.579 --> 00:34:41.079
holder,

461
00:34:41.940 --> 00:34:42.599
you don't,

462
00:34:43.700 --> 00:34:44.839
you don't run a

463
00:34:45.220 --> 00:34:50.055
Bitcoin business, and you're just running a note at home that actually isn't, like, sending and receiving Bitcoin every day,

464
00:34:50.615 --> 00:34:53.675
then running running running Bitcoin and changing

465
00:34:54.055 --> 00:34:57.115
or or, you know, and and and running like a UASF

466
00:34:57.734 --> 00:34:58.795
sorry for the dogs.

467
00:34:59.655 --> 00:35:03.515
It's good. Isn't really gonna be that alone is not gonna be that impactful.

468
00:35:05.250 --> 00:35:07.110
Finally, not my dogs on air.

469
00:35:08.290 --> 00:35:09.430
We passed 86,000.

470
00:35:09.970 --> 00:35:11.270
Woo. Let's go.

471
00:35:12.450 --> 00:35:14.070
Open water Bitcoin, baby.

472
00:35:14.610 --> 00:35:19.565
People forget every price is was once an all time high. Every single number,

473
00:35:19.945 --> 00:35:21.405
was once an all time high.

474
00:35:23.465 --> 00:35:28.765
Yeah. I mean, I I think I think it's important at the high level to realize that, first of all, no change.

475
00:35:29.065 --> 00:35:34.100
It's almost it's like in warfare. Right? Like, the defenders always have the advantage.

476
00:35:34.640 --> 00:35:35.540
And in Bitcoin,

477
00:35:35.920 --> 00:35:39.540
no change is is that home field advantage. I I think

478
00:35:40.160 --> 00:35:43.780
in in in general, when you're looking at any kind of change to Bitcoin,

479
00:35:44.480 --> 00:35:45.540
the most likely

480
00:35:46.160 --> 00:35:48.580
outcome is is no change.

481
00:35:49.265 --> 00:35:51.125
I mean, if I recall back to 2017,

482
00:35:51.825 --> 00:35:56.785
there was, like, very little organic support for segway 2 x. Like, it was just

483
00:35:57.505 --> 00:35:59.845
there was almost no one that was

484
00:36:00.145 --> 00:36:03.045
formally advocating for it except for this, like,

485
00:36:03.660 --> 00:36:06.640
form letter that was sent out by the big companies.

486
00:36:07.260 --> 00:36:09.040
And in the lead up to it,

487
00:36:11.180 --> 00:36:16.960
the only people really talking about it having a potential happening were saying that it was a chaotic outcome,

488
00:36:17.705 --> 00:36:20.125
and it provided uncertainty to Bitcoin.

489
00:36:20.905 --> 00:36:22.365
And then you had a loud

490
00:36:22.665 --> 00:36:23.165
minority.

491
00:36:23.625 --> 00:36:24.025
Well, I

492
00:36:24.825 --> 00:36:30.205
maybe even a majority, but the the loud people were saying that just wasn't gonna happen. It was bad for Bitcoin.

493
00:36:30.920 --> 00:36:34.220
And if you look back on the price action, what happened was

494
00:36:34.680 --> 00:36:38.780
it failed, and then we did our, you know, 20 x run,

495
00:36:39.160 --> 00:36:40.380
in Bitcoin price

496
00:36:40.760 --> 00:36:43.080
shortly thereafter. I mean, I remember

497
00:36:43.480 --> 00:36:45.980
and this is one of the tragedies of me deleting

498
00:36:46.494 --> 00:36:47.315
my x account.

499
00:36:47.935 --> 00:36:51.315
I remember, like, Celsius Ryan Celsius, specifically,

500
00:36:52.255 --> 00:36:52.755
saying

501
00:36:53.055 --> 00:36:58.115
that everyone should just pile into Ethereum because there was so much uncertainty in Bitcoin land.

502
00:36:59.099 --> 00:36:59.839
That was

503
00:37:00.299 --> 00:37:03.200
a a relatively popular sentiment at the time

504
00:37:03.740 --> 00:37:11.440
with Segwit 2 x looming on the horizon. So it was like there was almost no proponents for it in, like, a in a vocal way

505
00:37:11.819 --> 00:37:13.359
as that thing played out.

506
00:37:13.985 --> 00:37:14.485
Yep.

507
00:37:16.225 --> 00:37:18.245
Agreed. Maybe we can walk through

508
00:37:19.345 --> 00:37:26.485
a potential future scenario, which just adds to this conversation, but get gets into a little more of the nuance.

509
00:37:27.530 --> 00:37:30.270
And and that's I mean, you just said, Matt, like, it's,

510
00:37:31.609 --> 00:37:33.390
you know, the defenders have an advantage.

511
00:37:34.089 --> 00:37:38.670
I I I agree with that, but I'm gonna walk through a scenario where we could get caught off guard.

512
00:37:39.050 --> 00:37:50.015
So let's which which is why which is why I think it's important to discuss this so that we're not caught off guard. And I would add real quick. I I can imagine and this leads into the point you're gonna make. I can imagine a scenario where,

513
00:37:51.035 --> 00:37:53.135
contentious soft fork does have,

514
00:37:53.835 --> 00:37:56.720
some some grassroots support, but is contentious.

515
00:37:57.260 --> 00:38:07.270
Right? So and I think we're seeing that to some extent now. It's it's hard to measure exactly how big. And then one of the powers that media influencers have is to try to overstate the size of a,

516
00:38:09.395 --> 00:38:09.895
proposed

517
00:38:10.195 --> 00:38:12.535
thing or or try to understate that.

518
00:38:12.994 --> 00:38:15.175
And that can be very powerful because it can be

519
00:38:15.555 --> 00:38:25.380
self prophesizing in a way. You know? People wanna be on the the if something seems like it's gaining momentum, people generally are more inclined to go that route if they were kind of undecided to begin with.

520
00:38:26.400 --> 00:38:31.780
So I'll I'll leave it to Steve. But, basically, I I can imagine this scenario, it's it's well, I wouldn't call it a base case.

521
00:38:32.240 --> 00:38:38.265
I do think it's mindful to be aware of, and that's part of why we did this project is we figured that knowledge is power, and knowledge,

522
00:38:38.885 --> 00:38:45.865
can help avoid some of what what could be, you know, some pretty trick tricky or technically damaging scenarios in some contentious situations.

523
00:38:47.445 --> 00:38:51.465
So so the scenario I'm gonna set up, what what

524
00:38:52.900 --> 00:38:55.880
or did you have something, Matt? No. Go. Okay.

525
00:38:56.980 --> 00:38:57.860
The the,

526
00:38:59.300 --> 00:39:02.600
it one of the trends or or observations

527
00:39:02.980 --> 00:39:03.960
that is important

528
00:39:04.740 --> 00:39:07.000
is that mining is more centralized

529
00:39:07.415 --> 00:39:09.195
than ever, which is sad.

530
00:39:09.655 --> 00:39:10.474
And we don't

531
00:39:11.095 --> 00:39:12.075
it's not healthy,

532
00:39:12.375 --> 00:39:15.435
and a bunch of people are working on making mining more decentralized.

533
00:39:15.974 --> 00:39:19.994
But the reality is right now, you can get 3 people in a room,

534
00:39:20.570 --> 00:39:27.390
the CEOs of the 3 largest mining pools, and they control something on the order of 95% of Hash rate.

535
00:39:27.850 --> 00:39:28.570
And that's

536
00:39:28.970 --> 00:39:31.230
I find that a bit alarming. It's not

537
00:39:31.930 --> 00:39:35.884
it's not as bad as it sounds just with what I said because miners

538
00:39:36.345 --> 00:39:41.404
can switch from one pool to another, and that those switching costs are relatively low.

539
00:39:41.785 --> 00:39:42.845
So it's not like

540
00:39:43.305 --> 00:39:48.910
red alert bad, but it's but it's a yellow alert bad that something we wanna improve over time.

541
00:39:51.289 --> 00:39:52.750
I mean, before you continue,

542
00:39:53.289 --> 00:39:54.750
I would, I would

543
00:39:55.529 --> 00:40:01.150
I would say that mining centralization on the pool level is not as bad as it was historically.

544
00:40:01.655 --> 00:40:03.195
I mean, if you go back to 2017,

545
00:40:03.895 --> 00:40:11.115
Bitmain probably indirectly controlled, and specifically, Jihan probably indirectly controlled, like, 70, 75% of the hash.

546
00:40:12.775 --> 00:40:13.275
And

547
00:40:13.734 --> 00:40:17.435
now he probably indirectly well, not him because he left,

548
00:40:18.530 --> 00:40:23.750
he left Bitmain, but, like, the Bitmain mafia probably controls about 50% of the hash.

549
00:40:24.290 --> 00:40:27.030
And we have Foundry, which is, like, the soup KYC

550
00:40:27.490 --> 00:40:27.990
regulated

551
00:40:28.290 --> 00:40:29.270
mining pool

552
00:40:29.585 --> 00:40:33.444
that controls about 35% of the hash. So if you combine them together, you get to, like,

553
00:40:33.825 --> 00:40:34.724
90, but they're

554
00:40:35.025 --> 00:40:37.684
2 very different stakeholders. Right? Like, it's it's

555
00:40:38.305 --> 00:40:39.585
I mean, I I don't

556
00:40:40.305 --> 00:40:43.444
I'm I'm not saying that it's not something that we want to see improve.

557
00:40:44.660 --> 00:40:47.000
And, yes, I am acknowledging the irony

558
00:40:47.700 --> 00:40:59.320
that I'm putting a lot of faith in the KYC suit, mining pool. But I will say that they seem like they have their heads on straight in a lot of ways, and I don't really interact with the Chinese side of the of the ballgame.

559
00:41:00.795 --> 00:41:04.655
But in general, miners, I think, would rather not have

560
00:41:05.355 --> 00:41:10.734
any kind of uncertainty or chaos or stuff. So I I think in in general, if we saw any kind of

561
00:41:11.355 --> 00:41:14.415
contentious type of attack type of change,

562
00:41:15.720 --> 00:41:19.100
a lot of miners would act in self interest and try

563
00:41:19.880 --> 00:41:25.020
and seek out a way to to mitigate that, whether that's switching pools as Steve said.

564
00:41:26.680 --> 00:41:39.355
Yeah. Primarily switching pools. Right? And now we do have, like, a you know, Ocean doesn't really have that much hash rate, but we have the ability for people to self mine. They have the ability to move to Ocean and use data and and and choose their own block instruction,

565
00:41:40.455 --> 00:41:44.140
or move to a foundry, for instance. Right? If they're doing one of the

566
00:41:45.260 --> 00:41:48.320
and just even more before we there's a lot of nuance here.

567
00:41:48.940 --> 00:41:58.325
When I say that the Antpool, Bitmain mafia has 50%, it's because of of the way block instruction works. Basically, like, the central bank of AMP pool is handling

568
00:41:58.945 --> 00:42:05.685
a lot of the background for a lot of smaller pools. So there's a bunch of smaller pools that in effect can be thought of as one pool,

569
00:42:05.985 --> 00:42:09.685
and they all add up, to 50%. Okay, Steve. Now you can continue.

570
00:42:10.440 --> 00:42:12.220
Yeah. I agree with everything you said.

571
00:42:13.080 --> 00:42:18.380
And the my statement about increased centralization, I'd you know, over the past

572
00:42:18.920 --> 00:42:29.015
4 years or so, 4, 5 years. And that's because of the the last thing you said, which is bitmain slash amp pool is like a front for for many of the other branded pools today.

573
00:42:29.715 --> 00:42:30.935
Yeah. And

574
00:42:31.875 --> 00:42:32.375
but,

575
00:42:34.595 --> 00:42:38.695
so and and, yes, it's true. Miners can switch away from pools.

576
00:42:39.119 --> 00:42:41.299
But a scenario that concerns me

577
00:42:41.680 --> 00:42:42.900
is one in which

578
00:42:43.680 --> 00:42:46.180
if there's some kind of business incentive

579
00:42:47.279 --> 00:42:48.339
for both,

580
00:42:49.279 --> 00:42:51.539
Foundry and Bitmain, which I agree,

581
00:42:51.839 --> 00:43:01.474
it's kinda it's healthy to have 2 2 very different types of companies in 2 very different jurisdictions run by, probably, very different cultures. That is healthy for Bitcoin.

582
00:43:01.775 --> 00:43:05.875
But let's say there's there's some commonality and some motive business motivation

583
00:43:06.494 --> 00:43:07.394
or ideological

584
00:43:07.855 --> 00:43:09.555
or whatever that convinces both.

585
00:43:10.359 --> 00:43:20.220
It's possible that they you know, all they have to do is change the software they're running silently. They don't need to go through a signaling process or communicate it publicly. They can do it silently.

586
00:43:20.920 --> 00:43:21.420
And,

587
00:43:22.355 --> 00:43:25.895
you know, and change this offer to support some new consensus rule change.

588
00:43:27.875 --> 00:43:30.214
And and so in in in that scenario,

589
00:43:30.914 --> 00:43:31.414
there's,

590
00:43:32.355 --> 00:43:36.214
no fleeing of minors if they're if they're unaware.

591
00:43:36.755 --> 00:43:39.100
Now Right. Also in this scenario,

592
00:43:40.440 --> 00:43:41.420
let's say there's

593
00:43:42.360 --> 00:43:51.020
very let's say it's I mean, it's silent maybe that when the the miners start doing these these 2 or 3 mining pools, but then a handful of

594
00:43:51.505 --> 00:43:52.725
economic nodes and services

595
00:43:53.105 --> 00:43:56.885
adopt it because they're clamoring that they're like, some services

596
00:43:57.265 --> 00:44:00.805
depend that are being built today or depend on a consensus rule change.

597
00:44:01.185 --> 00:44:04.885
Like, their VCs are funding them to do a startup and a service that depends

598
00:44:05.400 --> 00:44:12.220
on a consensus change. It's huge risk because as stated earlier, the odds are Bitcoin's not gonna change,

599
00:44:12.680 --> 00:44:14.380
which means the service won't work.

600
00:44:14.680 --> 00:44:18.700
But if, if, if the consensus change is supported

601
00:44:19.000 --> 00:44:20.059
by Hash rate,

602
00:44:20.365 --> 00:44:21.905
then those services could

603
00:44:22.365 --> 00:44:26.145
provide features that allow their customers to lock up Bitcoin

604
00:44:27.085 --> 00:44:28.305
with those new rules.

605
00:44:29.485 --> 00:44:33.600
And the rest of the network, the rest of the economic nodes do not

606
00:44:34.080 --> 00:44:38.260
can be blind to this or like, you know, they don't need to upgrade their software.

607
00:44:39.280 --> 00:44:42.660
They don't need to even be aware of it and this could happen.

608
00:44:42.960 --> 00:44:45.620
And it's a very dangerous situation if the customers

609
00:44:46.325 --> 00:44:49.065
of these new services start locking up their Bitcoin.

610
00:44:50.085 --> 00:44:56.185
Because while it works fine, as long as the miners keep producing blocks that support those new rules,

611
00:44:56.565 --> 00:45:02.025
what can happen is if people are if are really locking up Bitcoin in these scripts with the new rules,

612
00:45:02.780 --> 00:45:04.240
that builds up a bounty.

613
00:45:05.420 --> 00:45:05.920
Right.

614
00:45:06.220 --> 00:45:08.080
And the reason it becomes a bounty

615
00:45:09.020 --> 00:45:12.240
is that if the miners if if Hash rates decides

616
00:45:12.700 --> 00:45:13.520
to effectively

617
00:45:13.820 --> 00:45:16.880
51% attack and roll back those rules,

618
00:45:18.704 --> 00:45:20.724
what the rest of the network sees

619
00:45:21.105 --> 00:45:22.724
isn't anyone can spend.

620
00:45:23.184 --> 00:45:24.964
That's how soft forks work.

621
00:45:25.664 --> 00:45:30.005
So if the rest of the network never updated their software to support these new rules

622
00:45:30.320 --> 00:45:33.460
and the miners roll back those rules, the rest of the network

623
00:45:33.760 --> 00:45:43.060
doesn't lose any sleep. It literally doesn't change the rest of network at all. But what happens to the customers who locked up their Bitcoin with these new rules? They just lost all their money.

624
00:45:43.885 --> 00:45:47.185
Or I mean, what technically happens is there is a chain split.

625
00:45:47.725 --> 00:46:02.310
There's a fork. And those who locked up their Bitcoin with the new rules and the services and economic nodes that support the new rules would be on one chain, and the rest of the network would be on the other chain. And, of course, that's like a total shit show scenario.

626
00:46:03.170 --> 00:46:04.390
Wait. Wait. Let's just

627
00:46:05.090 --> 00:46:06.150
walk through. So,

628
00:46:07.090 --> 00:46:07.590
hypothetically,

629
00:46:09.810 --> 00:46:10.950
the Ample Mafia,

630
00:46:11.285 --> 00:46:15.145
their 50% hash rate in Foundry, they both update to the self work.

631
00:46:15.525 --> 00:46:17.545
People are locking up funds or whatever.

632
00:46:18.005 --> 00:46:18.505
Then

633
00:46:19.285 --> 00:46:24.985
there's still, like, 10% of the hash that's not with them. And let's, you know, let's sit well, just for

634
00:46:25.445 --> 00:46:25.945
for

635
00:46:27.660 --> 00:46:29.839
simplicity's sake, let's say someone mines

636
00:46:30.300 --> 00:46:34.000
a block in ocean, and they construct their own block, and they're not running,

637
00:46:34.300 --> 00:46:37.200
you know, this, quote, unquote, secret self work.

638
00:46:37.660 --> 00:46:41.200
And they spend that money. They take that money from the

639
00:46:41.775 --> 00:46:45.555
users that are have their funds locked up. At that point,

640
00:46:46.174 --> 00:46:51.555
then that software becomes a hard fork. Then there's a retroactive chain split effectively. Right?

641
00:46:52.015 --> 00:46:52.515
Correct.

642
00:46:53.135 --> 00:46:57.470
And Yes. So, I mean, isn't there a game theory that as long as there's

643
00:47:00.330 --> 00:47:06.910
I I but I guess at that point, so much of the hash is on the other side, is on the secret software side,

644
00:47:07.425 --> 00:47:10.725
that it would have a significant amount more

645
00:47:11.345 --> 00:47:12.085
of cumulative

646
00:47:12.465 --> 00:47:13.365
proof of work,

647
00:47:14.225 --> 00:47:20.245
while the other side would have, like, 3% or 5% of the hash. But at that point, it would become very obvious that a

648
00:47:20.589 --> 00:47:21.089
that

649
00:47:21.390 --> 00:47:24.210
a secret software happened, and we'd be in Hartford territory.

650
00:47:25.069 --> 00:47:33.650
Yeah. I think I mean, there's at least a couple scenarios to explore here. The one the one I think you're talking about is where you don't get a 100% of hash rate supporting these new rules,

651
00:47:34.105 --> 00:47:36.525
but, like, 90 95% or something.

652
00:47:36.985 --> 00:47:37.645
And then,

653
00:47:38.025 --> 00:47:42.605
like, Ocean or whatever still is supporting legacy. There can be a hard fork from that.

654
00:47:43.305 --> 00:47:46.685
The scenario I'm talking about is, like, let let's just assume a a relatively

655
00:47:46.985 --> 00:47:48.125
cleaner, simpler

656
00:47:48.425 --> 00:47:50.520
scenario where we go from

657
00:47:50.900 --> 00:47:53.640
0% of ASH rate supporting a new rule to a 100%.

658
00:47:56.420 --> 00:47:57.080
And then

659
00:47:58.580 --> 00:48:01.160
some transaction you know, some customers

660
00:48:01.460 --> 00:48:03.480
locking up funds with these new rules.

661
00:48:04.525 --> 00:48:07.025
But the rest the vast majority of the

662
00:48:07.405 --> 00:48:07.905
network,

663
00:48:08.285 --> 00:48:14.065
not Hash Free, but economic nodes, don't upgrade their Bitcoin software to to enforce the new rules,

664
00:48:14.845 --> 00:48:26.090
which which and and and can happen out of ignorance. It doesn't mean they're against them or or, you know, it clearly means that they're not for them because they're they're not even they didn't upgrade. But it doesn't mean they're against them. They're just they could be unaware.

665
00:48:26.870 --> 00:48:29.450
Right. And then in that scenario, if

666
00:48:30.070 --> 00:48:31.450
it let's say, like, $1,000,000,000

667
00:48:32.070 --> 00:48:35.525
like, let let's say someone builds, like, some gambling casino,

668
00:48:36.625 --> 00:48:40.645
meme coin trading service or something on you know, with these new rules.

669
00:48:41.105 --> 00:48:42.805
You you can imagine that attracting

670
00:48:43.265 --> 00:48:44.244
tons of,

671
00:48:45.665 --> 00:48:47.340
customers who wanna get rich.

672
00:48:48.220 --> 00:48:49.600
And, like, let's say, $1,000,000,000

673
00:48:50.300 --> 00:48:52.560
is locked up in Bitcoin transactions

674
00:48:52.860 --> 00:48:55.600
with these new rules. That's a large bounty.

675
00:48:55.900 --> 00:49:00.800
Because all that has to happen then is a single person in the world, it could be us, anyone,

676
00:49:01.285 --> 00:49:02.825
could broadcast the transaction

677
00:49:03.445 --> 00:49:05.385
that spends all of that $1,000,000,000

678
00:49:06.045 --> 00:49:06.545
and

679
00:49:07.205 --> 00:49:08.025
pays yourself,

680
00:49:10.325 --> 00:49:13.465
and then you give, like, half of it to the miners in fees.

681
00:49:13.950 --> 00:49:15.170
Right. Like a incentive.

682
00:49:15.710 --> 00:49:17.890
Now that transaction goes nowhere

683
00:49:18.830 --> 00:49:23.170
if the miners continue to support the new rules because it would be invalid

684
00:49:23.470 --> 00:49:31.385
with the new rules. So it would just get rejected as invalid. However, the miners are gonna see this, like, half 1,000,000,000 or $1,000,000,000

685
00:49:31.924 --> 00:49:33.704
incentive. And at some threshold,

686
00:49:34.085 --> 00:49:36.585
they're gonna be like, we want that money.

687
00:49:38.164 --> 00:49:38.664
And

688
00:49:39.285 --> 00:49:40.609
if there's a 51%

689
00:49:40.910 --> 00:49:45.970
attack, if there's collusion among a very small set of mining pools that wanna capture that bounty

690
00:49:46.670 --> 00:49:47.650
and claim it,

691
00:49:48.190 --> 00:49:49.569
they they can do that.

692
00:49:50.670 --> 00:49:52.609
And if their if their calculation

693
00:49:52.990 --> 00:49:53.809
is correct,

694
00:49:54.545 --> 00:49:58.405
that like the vast majority of the Bitcoin network didn't upgrade

695
00:49:59.345 --> 00:50:00.485
the Bitcoin rules,

696
00:50:01.025 --> 00:50:01.525
then

697
00:50:01.985 --> 00:50:04.485
it it's only forking off the small

698
00:50:05.105 --> 00:50:08.725
faction that wanted that really pushed for these new rules.

699
00:50:11.690 --> 00:50:13.630
Another ingredient for this scenario

700
00:50:14.090 --> 00:50:17.230
is, or, or like another observation that's important to understand.

701
00:50:17.690 --> 00:50:18.190
Historically,

702
00:50:18.490 --> 00:50:21.550
every consensus change in Bitcoin that has occurred

703
00:50:22.095 --> 00:50:24.835
has been merged into the Bitcoin Core project,

704
00:50:25.695 --> 00:50:27.715
and it's come through Bitcoin Core.

705
00:50:28.415 --> 00:50:39.230
And Bitcoin Core is one implementation of Bitcoin. It doesn't define Bitcoin. It's just one implementation, but it happens to be used by, like, 99% of the network. It's the dominant implementation of the network.

706
00:50:41.050 --> 00:50:43.790
So if a consensus change has merged there,

707
00:50:44.810 --> 00:50:45.870
it doesn't mean

708
00:50:46.970 --> 00:50:48.270
Bitcoin adopts it.

709
00:50:48.810 --> 00:50:50.430
But if there's not

710
00:50:51.050 --> 00:50:51.550
huge

711
00:50:51.930 --> 00:50:52.430
controversy

712
00:50:52.974 --> 00:50:56.515
over a consensus change, such as Taproot is a good example,

713
00:50:57.295 --> 00:50:57.795
or

714
00:50:58.175 --> 00:51:00.835
basically any change prior to Segwit,

715
00:51:01.855 --> 00:51:03.555
there wasn't, like, a lot of controversy

716
00:51:04.015 --> 00:51:10.750
in Bitcoin. And so the rest of the network just upgrades to the latest version of Bitcoin Core. And then they have those rules.

717
00:51:11.609 --> 00:51:14.990
For this scenario though, or I mean, what we're observing is that,

718
00:51:16.010 --> 00:51:16.510
that

719
00:51:17.450 --> 00:51:19.309
there might be protocol developers

720
00:51:19.925 --> 00:51:24.505
and in others in other stakeholders who want a consensus change in Bitcoin,

721
00:51:24.965 --> 00:51:26.665
but the Bitcoin Core project

722
00:51:27.125 --> 00:51:28.025
isn't prioritizing

723
00:51:28.565 --> 00:51:31.305
evaluating it or reviewing any changes,

724
00:51:31.940 --> 00:51:34.520
and it might not get merged into Bitcoin Core.

725
00:51:34.820 --> 00:51:36.360
So part of the BCAP project,

726
00:51:36.740 --> 00:51:39.080
part of this this scenario that I'm describing

727
00:51:39.860 --> 00:51:42.040
is one in which an alternative client,

728
00:51:42.660 --> 00:51:49.085
like an alternative implementation is created to support the consensus rules. And that can simply just be a fork of Bitcoin Core,

729
00:51:49.545 --> 00:51:50.605
and you add in

730
00:51:51.545 --> 00:51:53.085
the the consensus change

731
00:51:53.465 --> 00:51:59.485
and then getting adoption of that. So so a huge part of this analysis and and the reason why in this scenario,

732
00:51:59.785 --> 00:52:01.805
the like I think the likely outcome

733
00:52:02.480 --> 00:52:06.020
is that most of the network doesn't adopt these consensus rules

734
00:52:06.480 --> 00:52:10.260
is because they'd have to switch away from Bitcoin Core to an alternative implementation.

735
00:52:11.359 --> 00:52:15.380
And that's a big decision. Like, imagine you're running a multimillion dollar business.

736
00:52:16.725 --> 00:52:19.065
If you don't have a great business need

737
00:52:19.685 --> 00:52:23.705
to for this new consensus change, why would you adopt

738
00:52:24.805 --> 00:52:28.265
new software when the Bitcoin Core Project has been

739
00:52:28.869 --> 00:52:34.970
something you've relied on for many, many years, and it's worked well. Like it's earned its reputation of being

740
00:52:35.270 --> 00:52:35.770
secure,

741
00:52:36.150 --> 00:52:36.650
trustworthy,

742
00:52:37.430 --> 00:52:37.930
conservative

743
00:52:38.230 --> 00:52:39.609
around consensus changes.

744
00:52:41.095 --> 00:52:45.915
It it has that reputation for a good reason, and that's why most people run that software.

745
00:52:46.375 --> 00:52:48.395
It's a huge, huge challenge

746
00:52:48.855 --> 00:52:51.995
to get a network to adopt an alternative client.

747
00:52:54.930 --> 00:52:55.430
Yes.

748
00:53:00.130 --> 00:53:05.430
I mean, I think it's kind of a cop out, especially after all the work you guys did on the research paper,

749
00:53:07.224 --> 00:53:08.685
to say these two words.

750
00:53:10.545 --> 00:53:11.045
But,

751
00:53:13.224 --> 00:53:21.005
like, rash I mean and I guess the beauty of Bitcoin is you're not supposed to assume necessarily rational actors. You're just supposed to assume selfish, greedy actors.

752
00:53:21.410 --> 00:53:30.950
But rational actors, I mean, there's there's a game theory here where they wouldn't want to attempt some kind of secret software because it would be incredibly messy and,

753
00:53:32.450 --> 00:53:36.745
you know, the their their their goose is Bitcoin. Right? I mean, in 2017,

754
00:53:38.325 --> 00:53:47.865
Jeehan with a bit main, like, heavily supported b cash, but he never moved the majority of his hash rate over to b cash. Like, he could've, at any point, moved, you know,

755
00:53:48.210 --> 00:53:52.470
nearly 70% of the hash over to to b cash, and that just never happened.

756
00:53:52.849 --> 00:53:55.030
And and there's there's something that's

757
00:53:55.570 --> 00:53:57.830
not objective and hard to quantify.

758
00:53:58.450 --> 00:54:01.750
But the reason presumably was because he was afraid

759
00:54:02.365 --> 00:54:05.825
that he's a nobody without Bitcoin. Right? Like, he's got nothing.

760
00:54:06.205 --> 00:54:09.585
And he was he was afraid of of disrupting that golden goose.

761
00:54:11.565 --> 00:54:12.525
Yeah. I,

762
00:54:13.485 --> 00:54:15.025
I I hope that's true.

763
00:54:15.405 --> 00:54:17.585
So, I mean, I hope this scenario described

764
00:54:18.210 --> 00:54:19.510
is so far fetched

765
00:54:20.290 --> 00:54:22.710
and unrealistic that it never comes to pass.

766
00:54:24.609 --> 00:54:26.550
But I think it's good to discuss it.

767
00:54:27.490 --> 00:54:35.515
And and just so that so if if it is as easy as, like, everyone's like, of course, we won't get in this path. Well, let's have people thinking about that

768
00:54:35.815 --> 00:54:41.595
and having it top of mind so we don't actually go down go down that line. Definitely hear from

769
00:54:42.055 --> 00:54:43.035
software developers.

770
00:54:44.375 --> 00:54:46.075
I mean, there's definitely frustration

771
00:54:46.930 --> 00:54:51.750
by people who have been earnestly working on, like, how to improve Bitcoin,

772
00:54:52.210 --> 00:54:52.710
technically,

773
00:54:53.250 --> 00:54:53.750
with,

774
00:54:54.210 --> 00:54:54.710
proposals.

775
00:54:55.170 --> 00:55:00.070
And then frustration that it doesn't get the attention from any active Bitcoin core developers,

776
00:55:01.065 --> 00:55:04.125
or or not that many. And it doesn't get review cycles

777
00:55:04.665 --> 00:55:07.244
from the Bitcoin core project. And I guess

778
00:55:07.705 --> 00:55:10.744
another insight from working in DCAP is,

779
00:55:12.025 --> 00:55:13.380
the kind of power that

780
00:55:13.859 --> 00:55:15.160
Bitcoin Core developers

781
00:55:15.619 --> 00:55:17.160
have, particularly the maintainers.

782
00:55:17.619 --> 00:55:24.680
It's it's, like, actually the opposite of what I hear a lot of people new to Bitcoin think. Like, a lot of a lot of people new to Bitcoin

783
00:55:25.299 --> 00:55:35.515
or even the people who have been around Bitcoin for a long time but don't really understand the Bitcoin core project or developers very well, will assert that the maintainers, like, 5 people,

784
00:55:36.215 --> 00:55:37.595
are in control of Bitcoin.

785
00:55:37.975 --> 00:55:40.075
Like, they can make they can change Bitcoin,

786
00:55:41.015 --> 00:55:44.300
and we're powerless. And, of course, that's ridiculous

787
00:55:44.600 --> 00:55:44.760
and false.

788
00:55:46.600 --> 00:55:56.775
Sure, they can, like, click a button and merge in a consensus change to Bitcoin Core. But number 1, it's public and transparent and everyone's gonna see that and be like, what the fuck are you doing?

789
00:55:57.654 --> 00:55:59.595
You know, if there's not if there's not consensus.

790
00:56:00.135 --> 00:56:02.635
And number 2, people don't have to update that software.

791
00:56:03.575 --> 00:56:10.110
I mean, if there is something that absurd, like, there would be a fork of the Bitcoin Core Project, and, like, people would just

792
00:56:11.150 --> 00:56:13.410
the the all the earnest or or, you know,

793
00:56:13.790 --> 00:56:17.170
honest developers would move to that. So, of course, they don't have that power.

794
00:56:17.550 --> 00:56:19.250
But we but the flip of that,

795
00:56:20.670 --> 00:56:24.210
we observe that they do have, which is a a veto ish

796
00:56:24.795 --> 00:56:25.295
type

797
00:56:25.755 --> 00:56:34.655
power. And I say it ish because it's not a full veto. But because Bitcoin Core is so dominant on the network, it's it's so difficult

798
00:56:36.315 --> 00:56:37.960
to get to to coordinate

799
00:56:38.260 --> 00:56:41.240
the entire network to switch to a new project,

800
00:56:41.619 --> 00:56:42.520
a new implementation

801
00:56:42.980 --> 00:56:43.960
of Bitcoin.

802
00:56:46.339 --> 00:56:52.279
If the Bitcoin Core project doesn't merge any consensus change, it makes it very, very, very difficult

803
00:56:53.234 --> 00:56:56.775
for the network to adopt that change. You would need to go through

804
00:56:57.154 --> 00:56:58.615
a scenario like I described

805
00:56:59.075 --> 00:57:00.135
5 minutes ago.

806
00:57:02.355 --> 00:57:03.255
Right. So

807
00:57:03.795 --> 00:57:05.575
so I I do I do that

808
00:57:05.954 --> 00:57:09.010
power is is quite or that is a big power,

809
00:57:09.310 --> 00:57:10.690
by the Bitcoin Core maintainers.

810
00:57:17.950 --> 00:57:24.805
So, I mean, plenty of people are bullying me in the chat about audio quality and video quality. And, I I I

811
00:57:25.105 --> 00:57:27.765
think the recording, it will be much better quality.

812
00:57:28.145 --> 00:57:31.365
I am obviously not home. I'm not in the studio.

813
00:57:33.440 --> 00:57:37.460
But I can hear Lynn and Steve great, so I think the recording is gonna come out great.

814
00:57:38.800 --> 00:57:39.300
The

815
00:57:41.680 --> 00:57:42.900
is there an argument?

816
00:57:43.200 --> 00:57:44.180
Like, I feel

817
00:57:46.240 --> 00:57:47.940
sometimes I feel like people

818
00:57:49.065 --> 00:57:49.805
came out

819
00:57:50.345 --> 00:57:51.165
of 2017.

820
00:57:51.785 --> 00:57:53.885
Like, they took away the wrong things.

821
00:57:54.265 --> 00:57:56.845
Is there an argument that there should be more

822
00:57:57.145 --> 00:57:57.964
hard forks

823
00:57:58.505 --> 00:57:59.484
because it's cleaner

824
00:57:59.865 --> 00:58:01.805
than soft forks? Like, I

825
00:58:02.210 --> 00:58:06.789
I you know, VCaaS, obviously, the market completely rejected it. No one wanted it.

826
00:58:07.569 --> 00:58:12.230
It didn't really have any kind of talented developers behind it. It was very much a

827
00:58:14.724 --> 00:58:25.385
I I I think it was just something clearly users didn't want. Right? And it was it was making the wrong trade off balance. But is there an argument to be made that's particularly for con contentious things?

828
00:58:25.765 --> 00:58:31.670
Like, anyone can hard fork. 1 of the coolest parts about Bitcoin is, like, literally, anyone can hard fork if they want to.

829
00:58:32.130 --> 00:58:36.870
Does it not have, like, way less edge cases and potentials for chaos if you just

830
00:58:37.970 --> 00:58:41.270
have them just hard fork and just see what happens?

831
00:58:44.375 --> 00:58:51.275
I mean, I think it well, you you sort of framed it as, like, for contentious changes. I mean, for for non contentious changes,

832
00:58:53.175 --> 00:58:55.355
I I let me first state.

833
00:58:56.010 --> 00:59:03.950
My my impression when I started really diving deep into Bitcoin and learning in 2017, my initial impression was soft forks are just

834
00:59:04.410 --> 00:59:06.510
decidedly better than hard forks.

835
00:59:07.050 --> 00:59:07.545
They

836
00:59:07.865 --> 00:59:19.885
for for any change that a software can be used. And I don't think it's that simple. I think it's definitely there's a set trade offs between the 2. It's it's not as that it's not that simple. But having said that, I still think for any noncontendious

837
00:59:20.345 --> 00:59:20.845
change,

838
00:59:21.320 --> 00:59:22.380
a soft fork,

839
00:59:23.800 --> 00:59:25.980
its its advantages outweigh

840
00:59:26.440 --> 00:59:27.980
hard forks. And because

841
00:59:28.520 --> 00:59:37.414
if it's non contentious, no we don't want anyone to fork off. We wanna keep the network intact. And there if the network is just so large and vast now,

842
00:59:37.875 --> 00:59:39.494
it it seems incredibly

843
00:59:40.035 --> 00:59:40.535
difficult

844
00:59:41.155 --> 00:59:41.815
to get

845
00:59:42.194 --> 00:59:43.335
the entire network.

846
00:59:43.714 --> 00:59:47.015
You need a really, really, really long period of time,

847
00:59:48.260 --> 00:59:49.880
like 5 years or more

848
00:59:50.180 --> 00:59:58.040
to like, for a flag day, in which everyone has to have upgraded their rules within that very, very long period of time. And if you do it in, like

849
00:59:58.740 --> 01:00:07.415
I mean, we we show data in the paper on how long it takes just naturally for people to upgrade Bitcoin Core, and I think it's, like, on average, 40 40, you know, about a year or whatever.

850
01:00:08.994 --> 01:00:10.435
Alright. I figured if that's the

851
01:00:11.474 --> 01:00:17.575
maybe that's the 50 50th percentile or something. It takes a it it takes years for people to the whole network to upgrade.

852
01:00:18.800 --> 01:00:22.180
So that's my thoughts on on soft fork versus hard fork.

853
01:00:23.119 --> 01:00:31.940
Yeah. But they yeah. Go on, man. I think that and I also think that so because hard forks are very hard to pull off compared to the incumbent network,

854
01:00:32.320 --> 01:00:33.300
most of the people

855
01:00:33.975 --> 01:00:41.195
that are in favor of a contentious change, let's say the more progressive side, people that are more technically progressive, they want a certain change.

856
01:00:41.575 --> 01:00:48.395
They have an incentive to try to make all of Bitcoin change or to have a change that that is compatible with the existing network.

857
01:00:48.920 --> 01:01:01.875
That's kind of what they ultimately wanna do. So from their perspective, I would see why they're trying to you know, they they they instead push more toward a contentious soft fork than push toward a a contentious hard fork and just kinda go play with their own coin.

858
01:01:03.635 --> 01:01:05.735
Barry, where are you? I totally agree.

859
01:01:09.235 --> 01:01:12.695
But, I mean, is it doesn't it go to reason that there's so many different

860
01:01:13.395 --> 01:01:17.655
types of stakeholders in Bitcoin that almost everything will be contentious at this point?

861
01:01:19.770 --> 01:01:23.070
Well, the the I mean, I mentioned the great consensus cleanup earlier.

862
01:01:23.370 --> 01:01:24.910
Like, I'm optimistic

863
01:01:25.290 --> 01:01:26.510
that that will get

864
01:01:26.810 --> 01:01:29.070
we'll see that change, and it won't be controversial.

865
01:01:29.530 --> 01:01:32.510
But it's in the category of bug fixes. Right? So,

866
01:01:33.185 --> 01:01:36.805
as as long as the the the software is created super well

867
01:01:37.185 --> 01:01:38.405
tested, vetted,

868
01:01:40.065 --> 01:01:40.805
and then

869
01:01:41.585 --> 01:01:44.165
the purpose of it is is clearly communicated,

870
01:01:44.465 --> 01:01:46.005
it's really hard to imagine

871
01:01:47.160 --> 01:01:48.140
any stakeholder

872
01:01:48.920 --> 01:01:54.780
not wanting to see it. Because because even if you like, if you're in the investor stakeholder group and you only

873
01:01:55.240 --> 01:01:59.980
your definition or or purp the purpose of Bitcoin in your mind is state,

874
01:02:00.359 --> 01:02:01.260
store of value.

875
01:02:01.745 --> 01:02:03.205
That's all you care about.

876
01:02:03.825 --> 01:02:05.365
You should absolutely care about

877
01:02:05.665 --> 01:02:12.805
security that could ruin your store of value. So I do think that change is likely to get consensus, but new features,

878
01:02:14.625 --> 01:02:15.445
much harder.

879
01:02:17.000 --> 01:02:18.220
But but but again,

880
01:02:18.599 --> 01:02:21.740
if the the way the dynamics are right now,

881
01:02:22.200 --> 01:02:24.940
if the Bitcoin Core project can be convinced

882
01:02:25.560 --> 01:02:27.740
there's a change, including a new feature

883
01:02:28.440 --> 01:02:31.020
that is beneficial to the network and,

884
01:02:32.165 --> 01:02:37.625
doesn't introduce sufficient risk. And if it gets merged into Bitcoin Core, that's a very powerful step because

885
01:02:38.485 --> 01:02:47.849
the inertia of the network is to run Bitcoin Core and then upgrade to the latest version of Bitcoin Core. So it requires a response then by the network

886
01:02:48.230 --> 01:02:48.890
to not

887
01:02:49.270 --> 01:02:56.410
have that change occur. And I think Taproot is a good example of that. Most people in Bitcoin can't really explain Taproot.

888
01:02:57.270 --> 01:03:03.075
I when it when it activated I mean, I know if you're on if you're if if if you're, you know,

889
01:03:03.455 --> 01:03:10.835
on Twitter or listen to your podcast, you probably have heard of it. But there's a lot of Bitcoiners who aren't on Twitter,

890
01:03:12.175 --> 01:03:20.740
and they, you know so so even in 2021 when it activated the, you know, I bet a huge portion of people in Bitcoin or hold Bitcoin

891
01:03:21.280 --> 01:03:25.220
weren't even aware of Taproot, and guess what? They they got it, you know.

892
01:03:25.600 --> 01:03:26.580
They they,

893
01:03:27.040 --> 01:03:29.985
and so I think I think that could occur

894
01:03:30.525 --> 01:03:31.025
again.

895
01:03:32.125 --> 01:03:35.905
Yeah. But it was I mean, a tavern might as well have been a decade ago.

896
01:03:36.285 --> 01:03:37.265
Like, that was,

897
01:03:38.125 --> 01:03:39.345
it was a different time.

898
01:03:41.480 --> 01:03:43.579
And I think there was also a level of complacency

899
01:03:44.520 --> 01:03:45.020
where

900
01:03:47.720 --> 01:03:49.819
I don't know. We had just been out of 2017.

901
01:03:50.200 --> 01:03:51.900
We were, like, riding high.

902
01:03:52.920 --> 01:03:56.380
Taproot had been, like, pretty well reviewed, and, like, people were just,

903
01:03:57.365 --> 01:04:03.305
like, the stakeholder dynamic right now is completely different. I I just I know it's an incredibly controversial opinion.

904
01:04:04.005 --> 01:04:04.505
And,

905
01:04:06.244 --> 01:04:07.305
but I I just

906
01:04:07.605 --> 01:04:11.865
to me, like, it was I still I feel like it's a wrong takeaway from 2017

907
01:04:12.165 --> 01:04:16.869
with hard forks. Like, for whatever re like, I know why the main reason we're not

908
01:04:17.750 --> 01:04:25.849
we don't we we don't do hard fork first is a security reason. Right? And it make it makes sense to me. Right? This idea that,

909
01:04:27.605 --> 01:04:28.984
if we do a hard fork,

910
01:04:29.525 --> 01:04:32.505
they're all the previous clients aren't backwards compatible.

911
01:04:32.805 --> 01:04:44.380
And the problem with that is if there's a bug introduced or something like that, the network just grinds to a halt instead of people being able to fall back to older nodes. Or if you're running an older node, it still works. Right? And that's a key aspect.

912
01:04:44.760 --> 01:04:51.580
This idea of soft forks being backwards compatible and idea of, like, being opt in is actually kind of bullshit in my mind.

913
01:04:51.880 --> 01:04:52.380
Because

914
01:04:53.080 --> 01:04:58.700
if you have a presegment node, for instance, you're not seeing any Segment transaction or any Taproot transaction.

915
01:04:59.055 --> 01:05:12.435
Like, you're basically not interacting with the network. You just you're not verifying the majority of of economic activity that's happening on the network. And, ultimately, you and you have no choice but to be a part of it. So, like, the so like, when you're talking about

916
01:05:13.350 --> 01:05:13.850
consent

917
01:05:14.630 --> 01:05:17.610
rather than technical things, when you're talking about social consent,

918
01:05:18.470 --> 01:05:23.130
soft work actually feels a little bit more insidious to me. It feels a little bit

919
01:05:23.750 --> 01:05:24.250
more

920
01:05:24.550 --> 01:05:29.765
like the Defender doesn't have the no change defender doesn't have as much

921
01:05:30.145 --> 01:05:31.685
agency in that situation.

922
01:05:32.145 --> 01:05:33.605
While with a hard fork,

923
01:05:34.545 --> 01:05:35.365
like, 2017,

924
01:05:36.625 --> 01:05:39.925
yeah, it was chaotic to a degree. It was a little bit messy.

925
01:05:40.290 --> 01:05:41.030
But, ultimately,

926
01:05:41.330 --> 01:05:44.150
like, if you just slept through the whole thing,

927
01:05:44.690 --> 01:05:47.190
you still had just as much Bitcoin as

928
01:05:47.490 --> 01:05:54.390
as before. And and you had just as much Bitcoin cash as before, and you could just, like, wait it out and see what happened on each side.

929
01:05:54.875 --> 01:06:00.815
And you'd be completely fine. Like, yep. Some of us did quite well selling the Bitcoin Cash side,

930
01:06:02.315 --> 01:06:03.855
but you could just sit there.

931
01:06:04.954 --> 01:06:06.015
And I I

932
01:06:06.474 --> 01:06:11.580
yes. Just just real quick. When just for, like, something that's particularly contentious,

933
01:06:13.000 --> 01:06:18.760
like, why, like, why it's just weird to me that we don't see more hard forks. Like, why don't we just see, like

934
01:06:19.800 --> 01:06:28.965
I mean, I'll just call it out by by degree because, like, it seems like the thing that most, like, a a lot a lot of people, a vocal minority have wanted, which is opcat.

935
01:06:30.305 --> 01:06:34.725
It's like, why don't we just see, like, an opcat hard fork? You just do it as a hard fork

936
01:06:35.025 --> 01:06:40.005
and then play it out and see see what happens rather than trying to do this whole

937
01:06:41.310 --> 01:06:42.290
song and dance.

938
01:06:42.910 --> 01:06:45.010
I I mean, I think Lynn's answer before

939
01:06:45.870 --> 01:06:50.130
is correct and and answered that. Like like, if let let's say that happened.

940
01:06:50.510 --> 01:06:51.970
I think most observers,

941
01:06:52.750 --> 01:06:54.130
certainly including me,

942
01:06:55.015 --> 01:07:01.675
that hard fork would be destined to be the the next BCH or BSB. It would be it would not get much hash rate.

943
01:07:02.055 --> 01:07:05.675
Investors wouldn't price it very high. It would just be this altcoin,

944
01:07:06.455 --> 01:07:10.690
almost certainly. And I think the people who are advocates for CAT,

945
01:07:11.790 --> 01:07:13.970
they they don't want that. They they genuinely

946
01:07:14.270 --> 01:07:22.130
and earnestly believe that CAT makes Bitcoin better. They're Bitcoiners. They wanna see Bitcoin have that. They wanna see the Bitcoin that all of us use

947
01:07:22.765 --> 01:07:31.484
have that. So as as Lyn said earlier, they're just they're they're not incentivized to do a hard fork. It's it's like the opposite of their goals. And I would I would point out my prior comment that,

948
01:07:32.205 --> 01:07:34.385
hard forks and soft forks have different,

949
01:07:35.325 --> 01:07:38.385
different stakeholders have different levels of power in those scenarios.

950
01:07:39.540 --> 01:07:41.000
So, to your point, Matt,

951
01:07:41.940 --> 01:07:44.040
you know, hard forks and soft forks,

952
01:07:44.580 --> 01:07:49.880
affect those groups differently. So in a hard fork scenario, it gives the investors a lot more power,

953
01:07:50.900 --> 01:07:52.440
the vast majority of the power.

954
01:07:52.895 --> 01:07:57.395
Whereas, in a in a contentious soft fork scenario or any sort of soft fork scenario,

955
01:07:58.335 --> 01:07:59.954
that gives economic nodes,

956
01:08:00.335 --> 01:08:04.595
and some of the other stakeholder groups generally more power than those, investors

957
01:08:05.130 --> 01:08:17.949
at least until there's a sufficiently long time that if they decide they don't like that network anymore, they could sell and and they therefore, they could impair the network. But they don't really have much of a say while that while that change is going, and so the network can kinda move on without them.

958
01:08:18.495 --> 01:08:21.635
So I I agree that, you know, obviously, contentious softworks

959
01:08:22.015 --> 01:08:23.795
have risks. I mean, that's part of why

960
01:08:24.495 --> 01:08:25.715
we wrote this paper,

961
01:08:26.175 --> 01:08:27.875
to explore some of those risks.

962
01:08:29.055 --> 01:08:30.995
But, yeah, I I don't disagree with you.

963
01:08:31.740 --> 01:08:32.640
I mean but

964
01:08:33.580 --> 01:08:38.860
do we do we agree that they're like, first of all, the 21100 bug that you mentioned, that

965
01:08:39.340 --> 01:08:43.305
and no one's figured out a way to do that with the software. So that's gonna require a hard fork.

966
01:08:43.865 --> 01:09:02.000
Presumably, something that we do way in advance that has a flag day that is, like, multiple clients compatible with. Right? Like, multiple releases of Bitcoin Core compatible with. So by the time we hit the hard fork, you could be running as, you know, a 5 year backdated version of Bitcoin Core and is still compatible with the hard fork,

967
01:09:02.700 --> 01:09:08.080
but it's gonna require a hard fork. But this idea that the the hard fork can never

968
01:09:08.395 --> 01:09:11.775
become the dominant chain, I think I think that might be misguided.

969
01:09:12.235 --> 01:09:20.175
Like Agree. Just because like, Bitcoin Cash was fucking retarded, just to be frank. Like, it was never it never had a chance. That doesn't mean

970
01:09:20.635 --> 01:09:22.014
that we couldn't have

971
01:09:22.870 --> 01:09:26.170
something that made sense and had actual market demand

972
01:09:26.470 --> 01:09:31.930
that became the predominant chain and became, quote, unquote, Bitcoin. Like, who decides which change Bitcoin?

973
01:09:33.110 --> 01:09:33.610
Yep.

974
01:09:34.150 --> 01:09:36.170
I agree with you. It would just

975
01:09:36.775 --> 01:09:42.075
be, I agree too. It it would just it would be really controversial. Right? Because you gotta you gotta set a date.

976
01:09:42.775 --> 01:09:43.515
And, like,

977
01:09:44.135 --> 01:09:49.435
if you pick 1 year, I I think a huge portion of people would say that's

978
01:09:49.735 --> 01:09:50.935
way way too,

979
01:09:53.430 --> 01:09:57.530
soon. And Right. I I to to to get more people on board,

980
01:09:58.470 --> 01:10:02.890
not not only on board with the change, but on board with the activation mechanism,

981
01:10:03.750 --> 01:10:11.525
you'd need to pick it to be, like, 5 years or more. Then the people who want that change don't wanna wait 5 or 10 years for a flag day to drop.

982
01:10:11.905 --> 01:10:18.244
So I think that's an interesting dynamic to discuss. So in in fact, that whole scenario, I think, would be interesting to add to the BCAP project,

983
01:10:18.704 --> 01:10:29.850
going deeper on that. I agree. Yeah. I think that I think my takeaway from that thing is that it it's not that hard forks can never win. It's that you need quite a lot of consensus to have the hard forks. And the ones that were proposed,

984
01:10:30.310 --> 01:10:32.490
or or activated ranging from b cache,

985
01:10:33.075 --> 01:10:36.855
to Segwit 2 x just didn't hit anywhere near the threshold

986
01:10:37.155 --> 01:10:43.255
that would be required. Whereas something like a critical bug with the existing chain, that's that's the that's the highest,

987
01:10:44.355 --> 01:10:47.370
you know, obvious case for making the hard fork win.

988
01:10:48.490 --> 01:10:51.550
And there could be other other scenarios that are just,

989
01:10:52.090 --> 01:10:53.470
so powerful. May maybe

990
01:10:53.930 --> 01:11:09.465
some maybe before that, like, 21100 thing happens, we have quantum computers and that that that finally becomes, like, a thing, And maybe there's changes around that or something like that. Like, they they basically it's something that threatens the existing chain in such a way that the hard fork is clearly superior

991
01:11:10.005 --> 01:11:13.625
in that type of environment is probably the the snares I I would envision

992
01:11:14.005 --> 01:11:15.545
for a successful hard fork.

993
01:11:17.580 --> 01:11:18.080
Another

994
01:11:18.860 --> 01:11:25.280
before we wrap, I wanna know, or I wanted to state another insight we had from the project, which I took away as a really positive

995
01:11:25.740 --> 01:11:31.440
takeaway that I had not thought of before, and I'm not sure how many others have as well. But I know that there's, like, a

996
01:11:32.034 --> 01:11:36.934
segment of Bitcoiners who are concerned about with the emergence of ETFs and big institutional

997
01:11:37.235 --> 01:11:37.735
money

998
01:11:38.594 --> 01:11:42.855
and powerful entities like that. What what could that mean for the future of Bitcoin?

999
01:11:43.795 --> 01:11:50.330
Are they gonna take control of Bitcoin and add add like KYC to the protocol, etcetera? There's like a fear of that.

1000
01:11:51.270 --> 01:11:53.930
Definitely something we should be talking about and

1001
01:11:55.030 --> 01:11:57.850
doing everything in our power to avoid. But

1002
01:11:58.310 --> 01:12:00.570
from our analysis on this project,

1003
01:12:02.804 --> 01:12:04.744
I think there's a case to be made

1004
01:12:05.525 --> 01:12:07.784
for the self custody individual

1005
01:12:08.244 --> 01:12:08.744
investor

1006
01:12:09.364 --> 01:12:10.264
having disproportionate

1007
01:12:11.045 --> 01:12:11.545
power

1008
01:12:12.244 --> 01:12:14.025
within the investor class.

1009
01:12:15.930 --> 01:12:19.630
And if you wind up in any kind of hard fork scenario,

1010
01:12:20.250 --> 01:12:22.990
where you fork a and fork b that are being priced,

1011
01:12:23.850 --> 01:12:25.230
or a futures market

1012
01:12:25.690 --> 01:12:26.190
where

1013
01:12:26.505 --> 01:12:35.645
we're speculating on fork a or fork b? Which one's Bitcoin? Which one do we have volume there? Well, how does that market work?

1014
01:12:37.385 --> 01:12:38.125
It requires

1015
01:12:38.825 --> 01:12:49.220
someone that I mean, in the case of a hard fork, you you your your Bitcoin turns into 2 coins. I have the same, you know, x number of coins for both forks.

1016
01:12:49.680 --> 01:12:57.055
If I really feel strongly that fork a is Bitcoin and fork b is not, and then fork a

1017
01:12:57.755 --> 01:12:59.775
is going to hold future value,

1018
01:13:00.555 --> 01:13:01.055
then

1019
01:13:01.915 --> 01:13:06.415
if if I I can put my my mouth is, I can sell all of fork b

1020
01:13:07.035 --> 01:13:12.560
and buy I can double my stack size on 4 k. It's super attractive value proposition

1021
01:13:13.420 --> 01:13:24.305
if you have the guts to do it and you believe in it. Of course, if you're wrong and you and you literally sell all of 1 and doubled on the other, you could wind up 0 Bitcoin if you're not correct.

1022
01:13:24.765 --> 01:13:26.225
But in that scenario,

1023
01:13:26.925 --> 01:13:35.585
who are the investors that are in a position to do that and do that quickly? It's self custody investors. They not only own the Bitcoin,

1024
01:13:35.965 --> 01:13:37.585
but they control the keys.

1025
01:13:38.199 --> 01:13:40.699
Whereas if you think about, like, BlackRock, Fidelity,

1026
01:13:42.040 --> 01:13:44.619
and big ETF issues, they're likely

1027
01:13:45.159 --> 01:13:46.540
to be very conservative

1028
01:13:47.000 --> 01:13:54.685
because they don't own the coin they're controlling. In fact, they don't even they don't own it, and they don't control it. Coinbase controls the Bitcoin.

1029
01:13:55.945 --> 01:13:56.445
BlackRock

1030
01:13:57.225 --> 01:14:00.445
is just the issuer and then the owners are the shareholders.

1031
01:14:01.545 --> 01:14:03.565
So it's a much more complicated

1032
01:14:04.105 --> 01:14:04.605
situation.

1033
01:14:04.905 --> 01:14:09.430
And obviously, BlackRock is very and Coinbase are highly regulated companies.

1034
01:14:09.970 --> 01:14:13.910
So they're going to be very risk averse. There's tons of people involved in decision.

1035
01:14:14.610 --> 01:14:22.150
They're they're highly unlikely to sell one fork, dump it, and double down on the other when it's still contentious and being decided.

1036
01:14:23.085 --> 01:14:29.505
Even, like, corporate treasuries are gonna be more slow moving and slow to act than a self custody investor.

1037
01:14:30.045 --> 01:14:31.265
So, you know,

1038
01:14:31.805 --> 01:14:35.025
given the early movement on such a market can really

1039
01:14:35.760 --> 01:14:40.340
suggest which works is Bitcoin, I think self custody investors have a lot of power.

1040
01:14:41.520 --> 01:14:46.980
I mean, this is one of the reasons why, like, hard forks for contentious stuff kinda appeal to me more.

1041
01:14:50.065 --> 01:14:54.725
Not that, like, I pretend to be, like, the judge, jury, and executioner on this shit.

1042
01:14:55.425 --> 01:15:01.045
I would say, Steve mentioned earlier, like, VCs are some VCs are investing

1043
01:15:01.700 --> 01:15:04.040
in things that require consensus changes.

1044
01:15:04.580 --> 01:15:07.640
I will just full stop say that 10 31,

1045
01:15:08.900 --> 01:15:13.240
has a rubric where we will never invest in anything that requires a consensus change.

1046
01:15:13.715 --> 01:15:16.775
And that's not even necessarily ideologically driven,

1047
01:15:17.875 --> 01:15:21.094
which it also aligns with ideology. It is just straight.

1048
01:15:21.635 --> 01:15:30.690
If you invest in things that require consensus changes, you're probably burning your investors' capital because it probably won't happen. Like, you pick any individual consensus change.

1049
01:15:31.870 --> 01:15:34.930
It is very unlikely to happen on an individual basis.

1050
01:15:35.790 --> 01:15:41.970
And I think I see Lynn nodding. I'm from what I know, at least from the non stealth companies that EagerDath has invested,

1051
01:15:42.465 --> 01:15:53.045
I don't think they've invested in anything that requires a consensus change. Am I correct? That's correct. And I would say that the stealth one, is also in that category. It doesn't doesn't involve it's it's nothing particularly controversial.

1052
01:15:54.560 --> 01:15:56.660
Yeah. Yeah. I do think there's a lot

1053
01:15:57.120 --> 01:15:57.780
of naivete

1054
01:16:00.320 --> 01:16:02.020
from, like, expecting

1055
01:16:02.320 --> 01:16:08.020
Bitcoin to change for some of these new VC funded services. I mean, I myself lost

1056
01:16:08.480 --> 01:16:09.140
a bet,

1057
01:16:10.665 --> 01:16:11.565
that I made,

1058
01:16:13.145 --> 01:16:13.645
in

1059
01:16:14.345 --> 01:16:15.565
2017 or 2018.

1060
01:16:16.185 --> 01:16:17.405
I I bet

1061
01:16:18.985 --> 01:16:19.485
10,000,000

1062
01:16:19.945 --> 01:16:20.445
sats,

1063
01:16:21.865 --> 01:16:35.660
that Any Prevout and Taproot would be activated by the end of, I think, 2020 or something like that. And Any Prevout has never been activated and Taproot activated, like, 9 months after I the the the bet.

1064
01:16:36.065 --> 01:16:39.205
So, well, that that's now, like, 8, $9,000.

1065
01:16:40.625 --> 01:16:46.565
So I feel I learned my lesson there of something I was, like, really excited about and bullish on, and I thought made a lot of sense for Bitcoin.

1066
01:16:47.025 --> 01:16:59.020
And I every every day in Bitcoin, I just learned how slow things move. And I I, like, I very much embrace that now. But, yeah, if you're new to Bitcoin and you're a VC and you're like, oh, all these shiny new things that can be done, they sound exciting,

1067
01:16:59.400 --> 01:17:00.940
I can see how that can be,

1068
01:17:01.400 --> 01:17:02.620
seductive. But,

1069
01:17:04.120 --> 01:17:14.015
it it it, at minimum, has to be acknowledged as an enormous risk. I mean, investing in start ups is already a huge risk, and then you have, like, a 10 x multiplier

1070
01:17:14.635 --> 01:17:17.375
if not only the service that's getting created

1071
01:17:17.860 --> 01:17:24.520
finds product market fit and customers and business model, but you also need Bitcoin to change. It's like a 10 x risk multiplier.

1072
01:17:28.340 --> 01:17:28.840
Awesome.

1073
01:17:30.185 --> 01:17:31.885
Any other insights you wanna cover,

1074
01:17:32.905 --> 01:17:33.885
from the paper?

1075
01:17:34.585 --> 01:17:35.945
One of the last ones is that we,

1076
01:17:36.985 --> 01:17:51.130
define state of mind, which is that different different groups can have different, levels of conviction. So we we've, again, broke that down into 6 categories. So on one end of the spectrum, there's people that are for a change, but then are also willing to expend resources to try to make that change happen.

1077
01:17:51.990 --> 01:17:56.250
Then there are people that are on the other side that are against it and willing to expend resources,

1078
01:17:57.315 --> 01:18:04.135
to stop that change from happening. Then you have the 2 that are in a little bit where they either support it or against it, but they're just kinda hands off.

1079
01:18:04.515 --> 01:18:15.920
And there's 2 in the middle that are neutral for different reasons. One is that they're they're aware of the change, and they don't have an opinion. They just decide I'm I'm not technical. I'm I'm just gonna let the network figure it out, or,

1080
01:18:17.020 --> 01:18:22.240
they just don't even know it's happening. They they couldn't tell you it's happening. And so one of our goals with the paper,

1081
01:18:23.020 --> 01:18:26.745
is to to get more people out of the unaware camp at least,

1082
01:18:27.705 --> 01:18:29.805
to kind of increase the overall

1083
01:18:30.185 --> 01:18:31.085
level of education,

1084
01:18:31.785 --> 01:18:36.285
including for ourselves, on how the network works and what some of the risks are in consensus,

1085
01:18:37.145 --> 01:18:39.885
because we've I guess we figure or at least I figured that

1086
01:18:40.680 --> 01:18:43.020
a more informed network is a healthier network.

1087
01:18:45.560 --> 01:18:46.060
Yep.

1088
01:18:46.680 --> 01:18:49.580
Awesome. Yeah. I agree. Knowledge is power.

1089
01:18:50.760 --> 01:18:52.380
Yeah. I agree. Knowledge is power.

1090
01:18:53.160 --> 01:18:54.860
And just one one last thing.

1091
01:18:55.415 --> 01:18:57.355
Again, it's an open source project.

1092
01:18:57.895 --> 01:19:07.195
It's the beginning, not the end. So we very much welcome people to engage. We're not claiming this is a perfect analysis or that we have all the answers here in this analysis. So,

1093
01:19:07.735 --> 01:19:08.475
there's undoubtedly

1094
01:19:08.855 --> 01:19:10.155
things that can be improved

1095
01:19:10.530 --> 01:19:13.590
and and new additions. And as as Lynn said earlier,

1096
01:19:13.970 --> 01:19:15.190
Bitcoin keeps changing

1097
01:19:15.650 --> 01:19:16.310
as well.

1098
01:19:16.850 --> 01:19:22.950
Even if this were a perfect analysis, it wouldn't be a perfect analysis in in a few years. So we welcome contributors to,

1099
01:19:24.115 --> 01:19:29.655
file issues if they see problems. If people wanna actually, you know, open PRs and and and improve it,

1100
01:19:30.515 --> 01:19:31.895
we would love to see that.

1101
01:19:32.435 --> 01:19:33.955
And then people who are,

1102
01:19:34.835 --> 01:19:43.340
you know, really highly engaged in helping with the project, we'd love to have more maintainers of the project as well. And people from different stakeholder groups,

1103
01:19:43.640 --> 01:19:48.460
you know, a good diversity in in people who are engaging in the project would be would be great.

1104
01:19:52.200 --> 01:19:52.700
Wonderful.

1105
01:19:55.094 --> 01:19:57.675
Thank you guys for joining. I enjoyed this conversation.

1106
01:19:59.175 --> 01:20:09.449
I hope to have both of you on again sometime in the future. I mean, Steve's a pretty much a constant routine guest, but, Lynn, it would be a pleasure to have you back. I appreciate that. It's been great to be here. I think it was a good discussion.

1107
01:20:10.070 --> 01:20:10.570
Wonderful.

1108
01:20:12.550 --> 01:20:22.844
So thank you guys for joining. Thanks to the freaks who joined us in the live chat. Huge shout out to the freaks who continue to support the show whether through podcasting 2.0 apps or through Zaps, on zap.stream.

1109
01:20:24.344 --> 01:20:28.045
The top the top boost on podcasting 2.0 apps,

1110
01:20:28.585 --> 01:20:32.685
from last week was 8 Myth Renderer, rider, die free with 21100

1111
01:20:33.145 --> 01:20:33.645
sets

1112
01:20:34.410 --> 01:20:35.550
saying good grip.

1113
01:20:36.170 --> 01:20:38.910
Thank you. I I love having Adam back on.

1114
01:20:40.410 --> 01:20:42.910
And stay on with success. Appreciate you guys. Peace.

1115
01:20:45.690 --> 01:20:46.429
Thank you.

1116
01:20:54.425 --> 01:20:56.285
Our world is chaotic,

1117
01:20:56.665 --> 01:21:00.930
but life found its way by channeling energy to bring order to chaos.

1118
01:21:01.490 --> 01:21:11.590
It is in our nature to seek signals amongst noise because it is through communication and exchange that we evolve beyond the darkness of chaos into the dawn of civilization.

1119
01:21:13.195 --> 01:21:24.975
Our evolution thrives in exchange of all the info we try to convey. They flow through to the marketplace and form the signals to regulate how we coordinate where things need to be. Price speaks so we learn to compete.

1120
01:21:25.355 --> 01:21:26.940
This drives us to efficiently

1121
01:21:27.240 --> 01:21:46.515
shape the world with our voice. Now let the market speak. So we build, we sow, we trade, we grow to meet our wants and needs. We specialize and drive from the mind, our creations into reality. We make progress in our process to get more for less, advancing society before forth dawn of the age of technology that harnessed the energy to reach prosperity.

1122
01:21:46.975 --> 01:21:59.680
Our money embodies the power to reap what we sow, so the market becomes a channel for our collective energy to flow. When value is traded for value, we are aligned and so we evolve. This is how amidst uncertainty,

1123
01:22:00.300 --> 01:22:01.680
life continues to grow.

1124
01:22:02.300 --> 01:22:10.000
But the dawn of tech gave rise to light speed information exchange. So to transact fast, we further abstract money from energy constraints

1125
01:22:10.300 --> 01:22:17.805
and became more aligned on a few large entities to coordinate trade, concentrating the power, resources, and authority to create

1126
01:22:18.185 --> 01:22:25.645
more and more of our money, distorting its signals, eroding its worth, and throwing us back into the darkness of chaos.

1127
01:22:40.960 --> 01:22:41.860
When we destroy

1128
01:22:42.240 --> 01:22:42.900
the mechanism

1129
01:22:43.200 --> 01:22:47.525
of money, we destroy our ability to navigate through uncertainty.

1130
01:22:48.145 --> 01:22:58.739
And when we can't trade value freely and directly, we must trust the few to govern the many. What happens when all our means center around an authority? Complexity

1131
01:22:59.040 --> 01:23:00.179
builds, now coordination

1132
01:23:00.640 --> 01:23:25.660
relies on conformity. Observe our thoughts, the sense of dissent and coerce our actions. Can there be true innovation when there's no freedom of expression? What happens to our voice, the ones that shape social discourse? Now whose ideas get created and which problems get solved? Because our progress depends on hearing many sides to resolve, then why would we suppress the voice that shapes how humanity evolves? When we cut off the perspectives

1133
01:23:26.040 --> 01:23:30.940
that make up society, we lose sight of the truth that forms our entire reality.

1134
01:23:31.400 --> 01:23:38.205
Each person's contribution builds up our resiliency. Did we forget these differences are what what strengthens humanity?

1135
01:23:39.465 --> 01:23:40.205
When communication

1136
01:23:40.505 --> 01:23:53.220
breaks, our words turn to silence. Our acts become violent and the world is divided amongst darkness. Truth is twisted by our pain and our bias, eroding the common ground, making us more and more fragile.

1137
01:23:54.560 --> 01:23:57.300
To navigate uncertainty, we must solve for robustness,

1138
01:23:57.680 --> 01:24:08.555
so everything gets tried and tested by various efforts, until we discover the system that best coordinates us. Mirrors life's process of channeling energy to create signal from chaos.

1139
01:24:09.175 --> 01:24:10.555
In the era of technology,

1140
01:24:10.855 --> 01:24:51.050
we transform energy into computational power to process the noise of free markets into structured order. And just by looking at numbers, we can derive how much power is required to reduce chaos and inscribe a flow of value for order verify that our transactions happened in line with shared rules. We don't need to seek trust when we can see proof. It is real time consensus that our lines is to evolve. This is how amidst uncertainty our lives continue to grow when we uphold our own rules. We preserve our own work and defend our own voice, which lets the true market emerge. The strength of the design lies in each of our participation since we are the nodes of channel, our energy end to end. As we claim responsibility

1141
01:24:51.510 --> 01:24:55.850
to uphold our own rights, we radiate the power that brings our truth

1142
01:24:56.310 --> 01:24:57.130
into light

1143
01:25:00.905 --> 01:25:19.310
And when that dawn of light touches all parts of the globe and it ripples throughout society and it returns us the hope that becomes the power that sparks humanity to thrive, that same power that fuels the creation of the mind. And when our mind and our money are truly set free and they transcend the limits

1144
01:25:19.690 --> 01:25:20.990
of past boundaries,

1145
01:25:21.370 --> 01:25:53.660
now knowing becomes owning and ideas become wealth. What happens now we can all push to expand the edges of our existence and assume evolution when things are in the hardest. As we head for the light, we have to push through the darkness that is in these moments. We do what we do best. We take the chaos in the darkness and use our power to create. It is in these moments when we're all in alignment and afraid of a difference, ascends us to a highest and distant depth of it all. Know that hope is not gone. It is always the darkest before dawn.