Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Kyle Torpey: Diving Into Bitcoin – The Debates, the Issues and What’s to Come

Episode Date: September 12, 2016

We’re joined by Kyle Torpey, a freelance writer, and journalist who writes for a number of publications in the blockchain space including Bitcoin Magazine, Coin Journal, and others. Know for his well-written articles and in-depth reporting on the important topics affecting Bitcoin today, Kyle provides his point of view on the scalability debate and gives an update on the recent and upcoming changes to the bitcoin protocol. Topics covered in this episode: An update on the scalability debate The outcome of the recent Hong Kong scalability workshop and code dev meeting in California The Bitcoin core development process The recent release of Bitcoin Code 0.13.0 The inclusion of Segregated Witness and what it enables Upcoming features in the roadmap Takeaways from the Ethereum hard fork Division in the Bitcoin community The evolution of the Bitcoin ecosystem in the last 2 years Potential mainstream applications for Bitcoin Episode links: The Five Most Useful Properties of Bitcoin When Should Developers Turn to Bitcoin? Darknet Customers Are Demanding Bitcoin Alternative Monero The Power of Schnorr: The Signature Algorithm to Increase Bitcoin's Scale and Privacy BIP-47 vs BIP-75: How Will Bitcoin Wallets Maintain Privacy While Becoming Easier to Use? This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/148

This is Epicenter, Episode 148 with guest Kyle Torpe. This episode of Epicenter Bitcoin is brought to you by the Bitfinity Conference taking place in Miami Beach from October 30th and November 2nd. Join industry thought leaders, investors, and leading blockchain companies to discuss and showcase how they will use blockchains in a wide range of industries. Go to Bitfinity.com slash Epicenter for discounts on registrations and exhibitor packages. And by Jax. Jaxx is a user-friendly wallet that works across all your devices and handles both Bitcoin and Ether. Go to J-A-A-W-X.io and embrace the future of cryptocurrency wallets. Hi, welcome to Epicenter, the show which talks about the technologies, projects, and people driving decentralization and the global blockchain revolution.

My name is Tiberi and Kro. And my name is Brian Fabian Crane. We're here today with Kyle Torpe. Now, I've been aware of Kyle Torpe for two and a half years or almost as long as I've gotten into. into this whole area. He's an excellent writer and journalist about Bitcoin, cryptocurrencies, blockchain technologies, decentralized technologies.

There's not a lot of them, but there's a few. And Kyle certainly, I think, is the one that stands out to me the most in terms of having like really in-depth, well-researched, intelligent writings about these topics. So he's writing currently for a Bitcoin magazine and Coin Journal, but he's also written for all kinds of other. publications and of course we'll be linking to quite a few of his articles in the show notes as well so thanks so much for coming on Kyle thanks for having me thanks for that

intro one of the reasons also why we wanted to have you on besides of course having been fans of you work for a long time is that we've not been doing so much coverage about Bitcoin and and partially it's also because we feel well there's few reasons one is that there's just not as many new projects seems to talk about. And another thing is also that we are just not quite as in the loop anymore. So this is going to be a great chance to kind of talk about Bitcoin, talk about a lot of things have been going on around Bitcoin, a lot of the important debates and topics. And Kyle has been specifically also writing about that, writing about, you know, everything from scalability to

the new things happening in Bitcoin core development. I think also like last maybe like six or seven months ago, we were just talking about scalability, scalability all the time. And at some point, I think we were both like, let's let's talk about something else for a while. But yeah, it'd be good to get a bit of an update on what's happening and what we can expect coming to Bitcoin NFL in the coming months. So to start off, yeah, as Sebastian said, we often talked about scalability. Can you give us just your perspective of at a very high level? What is being debated here and what have the different, the most important stages been in that debate? So this debate has been going on for years, even since the earlier days of Bitcoin when everything was going on in IRC.

And then it finally came to a head when we started getting closer to the one megabyte block size limit. and that's when Gavin and Mike Hearn decided to do first was BIP 101 and then they couldn't get it into core so they tried to fork with Bickwinxt T. That didn't work and then they tried to fork with classic that hasn't worked and now it seems like the core roadmap from December of last year is still what's being pushed forward.

There's not really, there's some dissenting viewpoints, but they're not really gaining much traction among the miners who would have to activate the hard fork eventually. But there is a small community that still wants the hard fort. I mean, one of the things that come

to my mind when you say these things of course is also that a lot of the people who wanted the hard fork may just have left and disengaged a little bit because it seems like a very small number of people essentially control core development they're not going to uh they're against it right they think the better way forward is not a hard fork and that there's certainly reasons for that but then there doesn't seem any way to have a voice in this process right So at some point, you just say, well, let's step back. So I think, you know, Mike Kern has essentially left the Bitcoin community. Gavin Andreessen, I'm not sure.

I mean, he's certainly not very present anymore. And I think the same is true for a lot of people. So to say most people agree on not doing a hard fork is, I think it's a little bit of problematic statement. I think with Bitcoin, you have to get consensus, not necessarily social consensus, but the network runs in consensus all the time. So making any change to the network is going to be extremely difficult, especially when we're at a $10 billion market cap, and people want to be very conservative about changes to the code. So it's true that these people didn't get their viewpoints or their philosophies merged into Bitcoin core. But that happens with everyone. I mean, just because your viewpoint doesn't get merged today doesn't...

I mean, I should put this a different way. you can't expect Bitcoin to be what you want it to be. It's what it was from the start, and changes to that are going to be extremely difficult. So we're going to speak a lot more about hard forks in a bit, but around the scalability rate, one of the events that got a lot of attention at the time was this thing called the Hong Kong Consensus.

And to be honest, I don't perfectly remember what exactly it was, but would you mind just running us through what happened back then and what the kind of outcome, larger outcome of that was? Sure, so there was a meeting in Hong Kong between some of the miners in China and some of the Bitcoin core developers, but not all of them. And Adam Beck, who I guess wasn't a core developer at the time, but he's the president of blockstream. So they came to consensus and decided that the plan would be to essentially continue with

the core roadmap, put out segregated witness, but also put forth code that would eventually activate a hard fork for increasing the block size limit. And there was a lot of controversy because some people in the community thought the core developers that were there broke their. promise essentially to release hard fork code and also the Segwit code because it got delayed but there wasn't actually any promise of when any of that code would be released it was more of just like an estimate of like the scheduling of when it would happen so now we're at a point where segregated witness is about to be well it's already put into zero point version zero point

1-3 of Bitcoin Core, and activation code should be merged relatively shortly. And I, I mean, the core developers who said they were going to create code for the hard fork are still working on it. I remember Peter Todd had a meeting with some of the other developers in New York where they were trying to figure out what they were going to put in the hard fork besides the block size limit increase. But the thing is, like, they can't speak for the entire community of Bitcoin core developers. So they can make a pool request, but it doesn't necessarily have to get merged.

There was also a point where Jehan Wu from Antpool said that he might delay the activation of segregated witness if that hard for code wasn't also available. But my sense is that, I haven't confirmed this with him, but my sense is that that's no longer the case, which makes sense because they basically, segregated witness also includes an increase to the block size limit effectively. So they'd basically be blocking the very thing that they want, so it wouldn't really make much sense. So amongst the proposals for increasing the capacity, the scaling capacity of Bitcoin,

so segregated with this, just as you mentioned, just came out, was merged in version 0.13. We're still waiting for miners to vote for that to be activated. We can talk about that in just a bit. What are some of the other possible solutions being explored or debated in order to raise the the transaction limit even higher because I think I read somewhere that the effective scalability increases was somewhat to the order of 1.7 megabytes per block with segregated witness. If Bitcoin is to become successful, as I think most of us agree it should, will probably need much more than that. So what are some of the other proposals being put

forth in order to be able to do like thousands of transactions, hundreds if not thousands, thousands of transactions per second potentially. So there are a lot of different things that are being worked on right now. Some of them are mainly focused on rather than increasing the capacity, fitting more transactions inside the capacity that we have right now. That's kind of what segregated witness does. That's also what Schnorr signatures kind of do, where they make transactions smaller so you can fit more of them in a block, essentially.

So just on that, I'm curious, how big of an effect is that with Schnoor's signatures? And would Schnoor signatures also require a hard fork, or is it possible to do that, for example, with segregated witness? At once, I'm not sure if Schnoor requires Segwit, but it, effectively, it would, I think it would increase the capacity by a third, but I'd have to double check. Aaron at Bitcoin Magazine did a really good article on Schnorr signatures a few months ago, so I would definitely check that out. And actually a side effect of Schnorr is that it could actually incentivize people to use coin join transactions. Because the way it works is when you combine your transactions with multisig, they actually become smaller, as opposed to like a bunch of different transactions being put in a block.

If you combine them in multi-sig, then it lowers the overall size of the transactions, which means lower fees would be paying lower fees for your transactions. So you're actually incentivized to mix your, or use coin join transactions. But that's only one of, there's another, this is more like very early days, but there's this concept of signature aggregation, which first came up publicly with the recent California meeting where the miners and the developers went out to California, and they made one stop at Stanford for a cryptography talk. And I forget the professor's name, but the professor at Stanford was talking about signature aggregation, where you basically, in a similar way to snore,

you combine the transactions signatures together. So instead of having like hundreds or thousands of signatures per block for transactions, you combine them all together and you only have one, it's like one effective transaction signature in the block. And it's what, I don't know if you guys saw the Mimble Wimble proposal for privacy. But I believe that also uses that technology. What was the name of that proposal? I don't think it had like a specific name.

It's just a general concept of signature aggregation. I wasn't familiar with that paper. But so all of these solutions, these proposed solutions are, are interested. because they, I think, solve the short-term problem of scalability by adding some capacity, but also, like, if you take Seguidness, for example, is like a clear optimization of the protocol and also fixes some other problems like transaction malleability. But so what are, what are sort of core developers and the people attending these conferences, these scaling workshops?

What are they expecting or what types of things do they expect from the protocol if it were to scale, massively, are they sort of betting on offloading transactions on things like the Lightning Network, or do they, is there some sort of expectation that Bitcoin should, the core protocol should handle the bulk of these transactions? Right. So in addition to the parts I just talked about where you're basically stuffing more transactions into each block that stays the same size, side chains and Lightning Network are also being worked on. And Lightning seems to be the thing that everyone's betting on,

although I know Jeff Garzig seems to think that sidechains might actually be better for micropayments and things like that. And it's also, I mean, root stock is mostly viewed as like an Ethereum spinoff, but it also increases capacity to 300 transatlac. transactions per second via side chain. So, I mean, that's side chains can be used that way to like basically put put those micropayments or payments that don't need as much security onto another chain. And the way rootstock is starting it, their side chain, it's not going to be merged mine

at first. It's a federated model where they have a bunch of Bitcoin companies basically signing the transactions. I guess what you're saying is. is there's sort of a general consensus that Bitcoin should scale horizontally and not necessarily vertically. Have the core developers sort of come around that idea? They definitely don't want to increase the block size limit right away. So there isn't really another way to, I mean, when you're talking about exponential scalability,

I think something like lightning is, or side chains for micro payments is, going to have to be the answer. It's not going to be able to work otherwise. So there's going to, essentially there's going to need to be some kind of trade-off where some transactions don't have the same level of security as like the core main blockchain. Like as a lot of people say, like, you don't need the entire Bitcoin network to confirm your coffee purchase at Starbucks in the morning necessarily. So people who actually need that censorship resistant quality of Bitcoin, they can still use the main Bitcoin blockchain.

But if, say lightning was activated tomorrow, I think a lot of the network would move there, just because a lot of the network is still, like people moving money between exchanges or to and from exchanges, So you're basically taking all of that off the blockchain completely, and you're leaving the core blockchain for the censorship-resistant regulatory arbitrage use cases that people actually need Bitcoin for. Let's take a short break to talk about Bitfinity, the Miami blockchain conference to be held this year from October 30th until November 2nd. Blockchain technology has been exiting the world of nerds and hackers and entering the mainstream.

We're at the beginning of a big revolution that's going to fundamentally change how the world works. At the Bitfinity Conference, we're going to have the heavyweight speakers, such as Don Tapscotter wrote the book The Blockchain Revolution or Joe Lubin of the startup consensus. But we're also going to have the industry panels that focus on real-world use cases and bring together both the tech expert, who really understand blockchain, and the kind of key decision makers that will help blockchain become a real commercial success. Now, you may just want to pack your bags

and buy a ticket to Miami, and that's certainly a good idea. But if you're involved in a project or startup, there's something even better. Bitfinity will feature dozens of presentations by starting startups so you can apply for the presenter package, get an exhibit of stand, and speak on the main stage to an audience of 500 to 1,000 high level people, including many VCs,

top decision makers. And of course, all that while sipping in martini in a luxury hotel in Miami Beach where Frank Sinatra once staying on stage. To learn more how you can join startups like Factum, Consensus, Everledge, and Stellar, visit them at Bitfinity.com slash Epicenter and find out how you can get 10% off the company presenter package or your $200 discount code to attend. We'd like to thank Bitfinity for their support of Epicenter. So we have sidechains and lightning network. I think of witness, et cetera, there are certainly some things happening. That being said, I think it was maybe two years ago that we had Mike Huron on this podcast and he said something that got a lot of attention at the time, which is he said that Bitcoin

development had ground to a halt and that not a lot was happening. And, you know, famously, he left the community afterwards. And since then, others have come out in a similar way. for example, there was recently posed by Brian Armstrong, I think, of Coinbase or Fred Ersum, maybe it was, also arguing that actually today in Ethereum you have much more, much more quick progress, much more activity. And I think that's certainly the perception of a lot of people. Now, you having, you know, following this very closely, what's your opinion?

Do you think that Bitcoin development has, Has it kept pace? Has it decreased in its pace compared to, let's say, two years ago? Has it increased? And how is that compared to, let's say, Ethereum at this point? I think with any of these public blockchains, Bitcoin has just kind of run the course of how development works. Because in the early days, obviously, it was just Satoshi doing whatever he wanted.

And you could update it whatever he wanted and release. upgrades, and then Gavin took over, and he had the same kind of benevolent dictator role on the protocol. And then when he left, around that time is when it was probably a little after, but that's when Bitcoin, like, everyone realized it's a thing, and it's probably going to stick around for a while, and the market cap shot up. So once you have all these new people coming into the ecosystem, then it's a lot harder to make a change that doesn't compromise a minority of users or like what their philosophy on what Bitcoin is. It's like a general progression.

So like obviously Ethereum and all these other altcoins or blockchains can, they can be a lot more flexible just like Bitcoin was in its early days because they just don't have the wide user base. that Bitcoin does. But back to the question, do you think that, so initially there was a lot of flexibility with, you know, Satoshi and Gavin and a lot of, I guess, changes because of that. And that then, I guess, around when Gavin stepped back,

a lot of new people came in and there was not so much agreement and probably slowed down. And do you think now that essentially, you know, people around blocks, control a lot of the development. Do you think that has accelerated again? Well, I wouldn't say new people came in, like, to the development process, but it was definitely a change in how the development process worked when Vlad took over. Because he was much more conservative, and he would only make changes if they had

completely wide consensus. That still seems to be the case. That's still how it works. And a lot of the COI developers view this as a good thing. I know some people don't. But again, it emphasizes the decentralization of the network when it's extremely difficult to make a change. It's a much better sign for decentralization

when you're not able to fork the chain and reverse the implications or the actions of a smart. contract. You see, that does not make sense to me. So if you had a large proportion of the network, there's a large proportion of the community, right, that were, for example, in favor of a block size increase. There was certainly a significant majority that were in favor of that at some point. And then that didn't happen essentially because of centralization, right? Because there's so much power in a small set of developers, many of, you know, a significant number of them paid by block stream and employed by block stream.

and that's a sign of decentralization because you couldn't make an upgrade. I mean, I would agree with you that in the case of Ethereum, they were able to do this fork because of centralization to an extent, but it seems to me that in Bitcoin, there's no fork also because of centralization of development. I think the point here is that democracy is also a form of centralization, right? you're allowing the majority to be the centralized controller of what should happen. Instead, in Bitcoin, it's more decentralized because even the majority cannot force the minority into a change that they don't want. Does that make sense?

Yeah, it sort of makes sense, although I don't think it's an act. I wouldn't look at it as an accurate description of what's going on, no, because you have not more, not as much decentralization as a democracy, but you have less essentialization because there's a small set of essentially the core developers, which whatever is five, seven people or something that have a lot of power. And of course, they cannot do it all on their own

and then they need minors to buy in, etc. Right, but the point is they're not forcing their change to the protocol on other people. They're sticking with what the protocol is. Like they're starting with, they're sticking with what it is. They're not changing it. Yes, right. No, no, that's, well, it's true to much extent, right, although, of course, for segregated witness, they have made some changes, which in case of segregated witness, I guess, was fairly uncontroversial, and people were generally in agreement that this was a good thing. If I can jump it, I think it's also really important to point out that it's pretty much impossible to judge consensus on these networks.

as like that's another thing that Ethereum hardfork showed like they said they took like a vote of like the coin vote and the minor vote or whatever and it was actually a very small segment of the people who own Ethereum or mine Ethereum that voted and they had like 85% support I think I don't remember the exact number and then everyone said oh just Ethereum classic thing isn't going to be a thing at all. It's good. We're going to fork and it's just going to be like nothing happened. Then they forked and within hours everyone was like popping, I remember seeing pictures on Twitter of Ethereum developers popping champagne and patting themselves on the back and Brian Armstrong and Gavin Andresen jumping to say that like this proves that we should be hard forking right now. And then Polonius lists Ethereum Classic and the story changes.

Today's magic word is insider. That's I-N-S-I-D-E-R. Head over to Let's-TalkBit-Goin.com to sign in, enter the magic word, and claim your part of the listener reward. So we mentioned earlier that the core client 0.13 just came out, and there's a certain number of updates to this client. Notably, the most important one is segregated witness, which we've been waiting for a long time, and enables a lot of new things. So like you mentioned, enables Lightning Network and also fixes some problems.

Can you talk about, well, what this means essentially for the network? I mean, what type of what is the advantage of having segregated witness and also what other things are included in this new release? Segwit includes a variety of advantages. Like I mentioned, the 1.7 megabyte effective block size increase, but it also changes the way that the developers can completely change the Bitcoin scripting system. So it makes it much easier to add new op codes to the system. and Johnson Lowe is currently working on a proposal called MAST that enables a few new op codes and reenables some old ones.

It also fixes transaction malleability, which is what enables the Lightning Network and things like that to exist. For those who remember, transaction malleability is also what Mark Cartellis blamed those with the, when people, basically like when Malkox was losing all those bitcoins, he was blaming it on transaction malleability. It also enables fraud proofs, which could be useful for improving the security of SPV clients, but there's a lot more research that still needs to be done there. but the general sense that I get from the core development team is like they're all extremely excited about this and BIP 9 which is called version Bits because it allows them to make upgrades to Bitcoin and make it a more powerful

system where you can make more powerful smart contracts and it makes that process of adding new features to Bitcoin much more fluid and much simpler. Right. Can we come back on this? I remember, I can't remember which episode it was we did where we talked about segregated witness into detail, but... It was the one with... I think it was Eric Lombrosa.

Yeah, Eric Lombrose. Right, right, right, right. And so I'd like you to come back on this, on this last point and how it enables new op codes to be tested? I'm not sure how it works technically, but I know I've talked to Johnson Lau, who is working on enabling new op codes and reenabling the old ones

through a bit called MAST, which will essentially, it will enable some new smart contract features for Bitcoin. And like he was, he essentially told me that he would not have been able to make these changes to Bitcoin without the addition of segregated witness. So that, as far as I'm aware, he's, he's like relatively new developer to the core

development team, but I'd have to double check that last point. Okay. And so then now that it's been merged and it's, in this latest version and people are updating their clients. I mean, all wallets, I guess, are going to have to, you know, now update their code base to support segregated witness. And the next step then is for miners to accept this new version of the code. How long do you think that process will take until we see this actually,

well, we see like, you know, these new segregated witness transactions occur on the network. So the code for segregated witness is already in the Bitcoin core client. It was added in 0.13, but the code to activate or signal support for segregated witness is coming in the next version, which will be 0.13.1. And it seems like that's close to being released. Maybe if I had to guess I would say in the next month or so it would be released. So the next step after that would be 95% of the miners have to signal support for this change to the protocol. And then, as you said, also the wallet developers also have to upgrade their wallets for this change.

but I think the difficulty of doing that has been overblown, at least because Nicholas Doyer, who he controls or he runs the N-Bitcoin library, and he's already implemented Segwit into that, and I believe Bitcoin J is pretty... pretty much done that as well, but I have to check. I think with the right amount of assistance from people familiar with Segwit, that, I mean, I've talked to Eric Lombroso a lot who you guys have had on the show, and he says he's been able to implement it in wallets in only a few days. And I know, like, you have to have a lot more testing and everything when you're talking about a live network.

but I think I don't know if it's going to take as long as some people are making it out to be. I think the real issue will be the activation from miners. I think that's what might take even longer. We'll love to see. Well, you know, let's say in some amount of time, you know, most transactions on the Bitcoin network are now, segmented transactions, can we expect to see some, what now? that we'll have more higher effective block size, can we expect to see transaction fees to go down? Is that a potential outcome here? Is that miners would get less transaction fees?

Well, the miners could get to set whatever fees they want. So it depends. I mean, it depends on how many more transactions happen on the network, too. I imagine fees might go down a bit since, at least at first, since we won't be hitting the, effective block size limit. But once you hit the limit, that's when the fee market kicks in. And those who really want their transaction confirmed right away have to pay a higher fee. So it just depends on how many transactions are going to be on the network once this segue is activated.

Okay. So let's talk about the roadmap. What's coming in, what's expected to come in? the next versions of Bitcoin. So by the way, is like, is there somewhere where, because I certainly don't know where, but where we can see the roadmap for development, like what's coming in version point 14, point 15, et cetera? There's a general outline on Bitcoincore.org.

It all stems from a post Greg Maxwell made on the mailing list after, I think was scaling Bitcoin in Hong Kong, where he laid out. everything that he and others thought they should do, and then everyone just kind of agreed or disagreed on the mailing list, and they eventually came to consensus that this is what we're going to do going forward. As far as other changes that are being made, compact blocks was also included in version 0.13 of Bitcoin Core, which I believe is similar to an idea called an IBLT that Gavin Andresen used to was working on one or two years ago

and the idea is to basically make sure that transactions on the network aren't sent twice to lower the overall amount of bandwidth needed and it also so like when you send out a transaction that transaction essentially gets sent around the network again once the block is mined, because it's included in that block.

So this is a way to like, when a miner mines a block, it'll get sent out to the network, and it'll just kind of like if you already have, because if you already have all these transactions in your mempool, you don't need to, the miner doesn't need to let you know about those transactions. So it's a way to like limit the amount of data that needs to be sent around the network.

And then that's more about bandwidth. and then with Matt Corallo's relay network was also recently improved to be faster and more decentralized. And that really helps the issue of latency, which has really been the main, one of the main things preventing Bitcoin from scaling higher because it essentially gives advantages to the biggest miners if when you mine a block, it takes a long time for everyone else to learn about that block on the network. The Lightning Network is also possible. And I remember Joseph Poon saying, who's one of the Lightning co-authors, who you guys have on the show, I think. He said that basically that the Lightning Network will be ready for at least testing on the live network whenever segregated witness is activated. So his original estimate was the summertime, but Segwit's taken a bit longer.

So whenever that's activated, we'll get to play around with the Lightning Network. So the Lightning Network actually will be usable on Bitcoin when Segregated Witness is out. I mean, of course, I know there's a whole bunch of other stuff that has to happen in terms of the Lightning Network knows. and there's some complexity there and the wallets have to integrate it, et cetera. But at least from Bitcoin's perspective, at that point, one can go ahead. Yeah, Segwit is the last change that's needed for Lightning and other things.

There's a bunch of different payment channel related proposals, but Lightning's just the most popular one. But yeah, Segwit is the last change that's needed before those can be workable on the Bitcoin network because Segwit fixes transaction malleability. Do you know if, like, payments service providers and wallet developers are doing anything to prepare for the Lightning Network to be ready? I haven't confirmed that with anyone, but I know a lot of wallet developers are excited about it, but I think I'm more familiar with wallets already integrating segregated witness than I am the Lightning Network.

Yeah, I suppose it probably is a bit early. Before we move on to the next topic, let's come back to another topic which we had discussed earlier, which was the halving. So I guess it's been about two months since we had the block size, sorry, the block reward halving. So it went from 25 to 12.5 Bitcoins. And at the time, you know, there was a lot of discussion around what would happen. It was sort of a much anticipated event. And I mean, sort of like, you know, like Y2K, you know, like what's going to happen after the halving kind of thing.

And now two months later, while Bitcoin is still running, you know, miners have not, I guess, I think so, have not turned off their hardware like massively. So what basically happened in these last two months from your perspective? Yeah, I didn't think it would have much effect at all. And it didn't when the having actually took place, but there was that run up in the price before the having happened. So I don't, it might have been related to the having. I'm not really sure.

the hash rate is actually higher I was checking it last night I think it's higher or around the same as it was before the having and I talked to some of the miners before the having took place and none of them were really worried I think

they thought like a slight decrease in the hash rate might have been possible which we did see at first but now it's already recovered. It's important to remember that all these like Bitfury and Bitmain, they just came out with like brand new mining chips that people were buying in like December and early this year. So it's not like they're going to buy these, spend all this capital to buy these chips in December and then turn them off like six months later. That's like these, this brand new, this is like a long-term play.

And a lot of the miners are also holding Bitcoin, so they're not necessarily, if they're long Bitcoin, they're not necessarily worried about short-term price movements. But yeah, it's been, since the having, it's been like pretty non-event, I'd say. Let's take a short break to talk about Jacks. Jacks is a multi-coin wallet created by the people at the Central. Now, in the past, if he had a whole bunch of cryptocurrencies, it was a pain to handle them. You either had to leave them on an exchange, which was insecure, or you had to have all these different wallets, which was a hassle.

Fortunately, now with Jacks, those medieval days of darkness, misery, and suffering are over. Jack supports multiple cryptocurrencies and new ones are being added. But it's not just storing cryptocurrencies you can do with Jax, but you can also exchange them directly from within side the wallet thanks to their shape shift integration. And since there's only one seed, Jax makes it super easy to back up and sync to the other devices. Jax works with Windows, MacOS, Linux, Android, iOS, and has browser extensions for Firefox and Chrome.

So go to Jax.io, that's J-A-W-X.I-I-O to download the wallet and get started today. We'd like to thank Jacks for the support of Epicenter. We've talked a little bit before about forking, and I want to come back to that topic to some extent. So you mentioned how hard it was for Ethereum to assess or to know really, you know, what did the people think, the holders of Ethereum, the coins think, the currency or the minus, et cetera. And that's certainly true, right?

There are some polls, but there was such low participation that you couldn't really make inferences overall. So I think that's a very accurate description. And to an extent, the same thing is true in Bitcoin. But don't you think that exactly that is why Forks are so essential? Because they're really the only way of seeing which alternative prevails, which one is strong or which one really has the support of the coin holders, also the miners, et cetera, right?

Because for example, with Ethereum, there's a very powerful way to do that, know, because all of a sudden you have Ethereum, and now you have ETH and Ethereum Classic, right? So I, as a user and an Ethereum holder, now I have a voice here. I can say I'm going to sell one and get the other, right? So, and then I don't just have a voice, but I also have an incentive to make that bet and say, okay, which one's going to succeed in the future? And now with Bitcoin, right, there's also this debate, like what's the right way for, which there be a block size increase or not.

And people like me, for example, hold some Bitcoin. It doesn't really have anything to say here. But if you had a fork and you had two versions, well, you could have that say. And also miners, right, they could choose where they direct their hash rate. So don't you think that a fork is really an essential way for decentralized cryptocurrencies and communities to evolve the protocol and make those kind of decisions? I think it, when it comes to hard forks, it might not be the best thing to compare Ethereum to Bitcoin because they're basically trying to do two different things.

Bitcoin's trying to be this bearer e-cash or digital gold, a store of value. So really it's just about holding that value and making sure nothing disrupts that. And when you do a hard fork, you're basically, creating, going from one network to two networks. So now whatever network effect advantage your chain had is now perhaps decreased because now you're split into two different networks for your thing that's supposed to be like a store of value. So I think it creates a lot of complexities with people who just want to have this store value that they know is going to be, or they believe it's going to be getting value over time,

and they don't want to deal with separate chains and things like that. I think I agree with you on that point where Bitcoin is a store of value. If you have some sort of forking event and all of a sudden, you know, the price of Bitcoin goes down or, you know, goes down by half. So that that has a massive impact on the ecosystem. Then again, I think that in, in order for innovation to happen, you know, disruption does in some cases sort of, you know, help innovation move forward. And perhaps at this point, because it is quite early in Bitcoin's,

you know, life, you know, it's only been around for, you know, less than 10 years. Maybe now is the time to, you know, you know, get that disruption going by having sort of these really hard shocks to the network with hard forks, et cetera, so that innovation can occur. And then whatever the network effect is, you know, whatever network effect happens, you know, towards one chain or another would sort of happen naturally. I don't know, what do you guys think about that? I think it's helpful if everyone is building on the same chain, too, just for the purposes of network effects.

it would be helpful if everyone was building on Bitcoin in some way. I think that's really all I have to add to that. Yeah, that's certainly true. Although I think if you look at it, even if you say look at something like Ethereum and the forte, which didn't, you know, certainly wasn't ideally executed. And probably the conservative Bitcoin developers would do, you know, a more thorough job in something like that. But even there, right, you really very quickly had, you didn't have a division on the level of developers, right?

There was maybe a few new ones like Charles Hoskinson that said, okay, now we're going to get engaged, do something in ATC. But most developers, they just kept with ETH, even though there was a significant market cap for ETC. I mean, I think always the idea that there would be an ongoing split of the community. I think the networks are there and there's a strong incentive to sort of align around a winner quite quickly. Yeah, but Ethereum fork for different reasons. Ethereum forked because of a sort of massive hack on the system and it was a reactionary event, whereas the discussion around forking for Bitcoin is around, you know, around implementing features which would allow the network to either succeed or fail.

And it's all really about uncertainty, I think, to this point. I mean, there's a lot of uncertainty on whether, you know, increasing the block size would cause more centralization, et cetera. And I think that, yeah, the reason for forking is completely different. And that's what I mean when I say that it could provoke innovation, where if we test these things out, then we know, okay, we know, we did this hard fork, we know it failed. And then so we have this other version that we can always move back to.

Yeah, that's a really good question. point and that's why when it comes to the reasons forking on Ethereum and Bitcoin are really different and like I'm not even sure if I think the

network effects would be more towards like if Bitcoin tried to if someone tried to fork Bitcoin like they did Ethereum to two megabyte blocks I don't think that would be enough for a community to start around

two megabyte blocks. With Ethereum, it was pretty much the philosophy that the chain should be as immutable as possible, which is a very core belief on public blockchains. So it was pretty obvious, at least to me and a few others, that there was going to be two chains after the fork happened. Just because you're creating it's such a differing philosophy that that some people definitely aren't going to go along with the failed-out chain or whatever you want to call it. And I also think it's important to point out that Ethereum Classic is actually the original Ethereum chain. And when you think about it, what we call Ethereum now is actually kind of an alt-coin of what we call Ethereum Classic.

Because it just kind of took the ledger, made a change, and started from scratch. It has the bigger market cap now, but Ethereum Classic is the original chain still. Well, so that depends how you define it, right? If you look at it in sort of through the lens of this immutability above everything, then yes, right? But if you look at it, for example, in terms of community, then ETH in Ethereum is the original community, right? So I mean, I think this depends a lot on where one focuses and how one looks at this. Right. But I think the immutability is why we're here, though, at least when it comes to public blockchains. So if you want to have like a public blockchain based on democracy, I don't think you really need proof of work maybe.

like you might be better to have some type of election or something and have notaries on like signing blocks on the ledger or something or just use fiat well so a lot to discuss here i mean first of all immutability is certainly a very important aspects of public blockchain there's no question about that and i think uh it is essential right now of course there's sort of the question whether it is one factor, many, or whether it is the, you know, the absolute one thing that can never be compromised. And personally, I would think it's one factor, but it has to be balanced against other factors. I think it goes back to what we're, the differences between Ethereum and Bitcoin, too, where immutability is definitely a lot more important on Bitcoin because it's supposed to be this bear e-cash, right? Ethereum is like a platform for smart contracts, so maybe, I mean, it might,

Mutability might not be as important. I don't know. It definitely seems like it be of the utmost importance on Bitcoin because it's just trying to be money. It's just, it's trying to be cash, so, like, you can't reverse transactions or anything. Yeah, I certainly agree there can be different weights as well. and Bitcoin has put a lot of weight on the immutability aspect, and one can argue whether that's, to what extent that makes sense,

and to what extent it doesn't make sense. It's certainly true that if you look at the idea of Bitcoin being this digital gold-type thing, then stability is very important, and hard-fork would most certainly add uncertainty, And from that point, it is a risk, right? So you have to balance that sort of against maybe saying, but you get more scalability, you get more innovation, et cetera. So it's not necessarily an easy trade-off to make.

There's a lot of different systems that could offer a lower amount of decentralization and kind of do what Ethereum is trying to do. Like, I know you can do, people have been talking about open transactions for a really long time, but there's a company stash run by Chris Odom that is finally actually developing something with it. And you can do smart contracts on a system of federated servers with that software. So that might be another way to do the tradeoff and you don't need a separate ether token to use. that platform. So there's a lot of different ways you can get that trade off.

So let's come to our last topic, which is the kind of topic of where is Bitcoin at? Like is it reaching, is it making progress in terms of becoming more widely adopted and reaching this mainstream, which is a topic that has often come up. So before this episode, actually I went back and I looked at some of our earliest episodes. and I looked at some of the topics, some of the companies that were in projects that we talked about back then. So let me give, just read out four of the earliest ones. So one was Hive. Hive was a wallet, which has recently been suspended.

And NEO and B we talked about once on the show very early on. And NONB, for those who don't know, was the Cyprus-based Bitcoin Bank, Typhine. They got a lot of attention and turned out to be some sort of scam. Yellow pay, which was a payments company, Bitcoin payments, kind of like bid pay a little bit in the Middle East. They also just closed down. Swarm also had lots of claims, but I think that project is pretty much dead. So all of those are kind of gone, and that's certainly quite representative from, if you look at projects back then. So you mentioned kind of when we talked before the show, some mainstream applications that are now launching that maybe have a chance to make it big and get a whole lot of users.

So I mentioned some like Abra, yours, Open Bazaar, Perth. Why do you think those have a shot? What's different now from two years ago? The main value proposition of Bitcoin is regulatory arbitrage or getting around regulatory. things like that. And I've been thinking about this recently. A lot of these apps that are coming out like yours, Abra, Brave, purse, even, pop chest. It doesn't look like it at first, but they actually do still involve regulatory arbitrage

in that the process of being a payment processor in complying with all these regulations when you're a custodian of funds is so, it costs so much to be compliant that you can't really do micro transactions without Bitcoin. And I recently talked to Andrew Lee from Perce about this because I was wondering, like, why does your platform actually need Bitcoin? Why couldn't you just do this with, like, PayPal even, or anything like that? And it's because he sent me back this document that was, like, a few, thousand pages long and it was from Visa and it was like their version of irreversible

micro payments and he was like well we'd have to comply with this and it could change at any time and it's and it's also when you're a centralized payment system sometimes you're you say you're not reversible until you the government comes in and says you have to reverse the payment which is, I think that happened with OK pay back in the day because they had some Mount Gox funds. And I remember early in the days of Bitcoin, there was also this exchange called Tradehill where you used to be able to make deposits with Dwalah. And then apparently Dwalah told Trade Hill that they don't need to worry about their customers

like depositing via Duala and then taking Bitcoin from the exchange and then reversing the Dwala transaction. They were basically saying it's irreversible. And then Dwala realized, I guess you can't really do that in the United States. So the trade hole basically had to shut down because people deposited with Dwala, traded it for Bitcoin and then reversed all their Dwala transactions. But yeah, so basically a lot of these apps that are coming online now involve micro payments in some way. So you got yours, who I just saw you guys interviewed maybe last week or last week, the project from Ryan X Charles, where you're basically, it's basically a content, a monetization platform for content creators. and their audiences can just, like, upfoot them. It's a very simplified way of putting it,

but just upvoting with Bitcoin, basically. Brave is doing a similar thing with content monetization, only it's a browser, and it's actually the browser I use every day now. So even if it didn't have Bitcoin or not, I'd still want to use it because it's blocking, it's like an ad blocker browser, basically, and then you can choose to send payments

instead of looking at ads. and then pop chest is another one where they actually did an experiment with this guy nerd rage who's like a YouTube celebrity I don't really watch this stuff but he has like hundreds of thousands of subscribers

and he decided to try out pop chest and he made more money on pop chest by charging like 25 cents per view or something like that than he did then he would have on YouTube advertisement And one last point on the mainstream applications, I think ABRA, if they do it right, could be the first mainstream Bitcoin wallet.

Because they're essentially, there's no volatility involved. They're hiding Bitcoin completely by hedging it on exchanges. I think they originally wanted to do smart contracts on top of Bitcoin to make it completely decentralized, but now they're hedging on exchanges. So we'll have to see exactly how it works. but if you can do Bitcoin without the volatility, that's going to be a very powerful tool. It's like Venmo worldwide without restrictions. I agree that all of these applications have huge potential, like specifically things like yours.

They address really, you know, hard problems that people have been trying to solve for many years. You know, I invite our listeners to go back two episodes to listen to that if you haven't done so. Open bizarre too, like having a decentralized eBay is a great thing. and has a lot of potential, especially in a developing world. Now, it seems like a lot of these projects that have had Bitcoin integrated as a payment mechanism, the problem with it, I mean, the value that Bitcoin brings is this regulatory arbitrage, and so this enabler of permissionless innovation and permissionless payments, but the issue is also Bitcoin.

Like Bitcoin is all is at once the value and the problem because it's hard to get people into Bitcoin. You know, there's still that friction between the financial, you know, traditional financial world and owning Bitcoin so that you can participate in these systems. So would you, would you agree with that? And if you do, what do you think finally needs to happen for all of these really great apps? Like there's all kinds. Like we're just setting a few here, but there have been other. others that have died as well to make it into the mainstream and to go sort of go above this problem that that is getting people into Bitcoin. Yes. And you guys talked to to Charles,

Ryan, about this when you talk to them about yours. I would, it is difficult still to get Bitcoin. I would say I just mentioned Abra. That could be an app where people want to use it because the volatility's gone, so it just looks like dollars or euros or whatever on their phone. And Coinbase and Circle kind of do this too, where you can hold, you don't need to use Bitcoin at all. So I think the key thing here is like these, you need to hide Bitcoin, basically. So like this is another conversation I had with Andrew from Perse. I told him, like, he shouldn't have Bitcoin or, like, mentioned at all on your website. It should just be deposit dollars to Coinbase, send it to purse.

It can be a Bitcoin transaction behind the scenes, and you get the discount, and you don't even know that Bitcoin was providing that discount. So there needs to be a lot more of that. That's something, I remember seeing a talk of Brock Pierce and Terrence Yang, who invest their VCs. We were talking about this same concept last year. And there's also creative ways that you can give people like a little bit of Bitcoin.

And I think Pop Chess is thinking about doing like the reverse of their system where instead of paying to watch a video, you get paid a little bit of Bitcoin to watch an advertisement. And when it comes to that kind of stuff where you're getting a little bit of little bit of Bitcoin in your wallet. I think that a lot of that relies on the lightning network because you're talking about those like micro or nanopayments. So we might see more of that once lightning is active on the network. Yeah, absolutely. So I think that would be very interesting to see whether this, whether you write and whether this new generation of applications

really do break out. I think there's certainly is, it's certainly the case that this original idea why a lot of people got interested in Bitcoin and all this possibility and potential is still there. And the idea of a cryptocurrency, global cryptocurrency, makes so much sense. So something like that, I think, is going to happen. And it would be great to see if some of those applications really managed to drive that. Yeah, I forgot to mention BIP 75 too. I don't know if you guys wanted to talk about that, but it's finally solving that problem of having to like scan QR code or like writing down a Bitcoin address and or copying it. Like we're almost at the point where it's going to be like an email address.

So I'll be able to send Bitcoin to Brian at epicenter Bitcoin.com and you'll get a return address with it. So there's BIP 75 and Bip 47, which is a more, bit 47 seems that. better protections when it comes to privacy and censorship resistance, although I'm not sure if the tradeoffs will be enough for people use that. But I just put up an article that I've been working on the coin journal that compares the two. So I recommend people check that out. Okay, perfect. Well, we're going to link to this, certainly in the show notes. So, Kyle, thanks so much for coming on. It's been a pleasure talking with you, and it's been a pleasure following

your readings over the years and we certainly look forward to many more fantastic articles also by the way thanks so much for all the great articles you've written about episodes of this show too you guys put out a lot of good content so yeah thanks thanks for having me on and for this discussion yeah so we're gonna we're gonna link to kyle's article uh in in the show notes quite a few that we've talked about and some other ones as well so you can check them out for anyone who hasn't been following his articles. I highly recommend that you do so. He really is, as far as I can tell, at least,

the best writer on Bitcoin and cryptocurrencies. So, and to our listeners, thanks so much for listening. So Epistenter is part of the LTV Network. You can find this show and lots of others at let's talk Bitcoin.com. Of course, you can also subscribe to the show and get it every Monday. And so either via your favorite podcast, or via video on YouTube.com slash epicenter Bitcoin. And thanks so much and we look forward to being back next week.