TFTC: A Bitcoin Podcast - 21 million is Non-Negotiable | Phil Geiger, Center of Hash E004

Episode Date: August 19, 2025

Phil Geiger discusses the economic incentives of the bitcoin network, why there is (and always will be) an incentive for someone to profitably sell power to the network, what mechanisms make bitcoin unique as the only demand for power in the world that removes counterparty risk and how the non-negotiable nature of bitcoin’s fixed supply enables it all. https://www.unchained.com/blog/21-million-is-non-negotiable

bill geiger paper bitcoin summer summer of phil which one is it well every summer summer of phil so this summer i think is paper bitcoin summer um i'm i'm enjoying it quite a bit i think it's a really unique time in bitcoin the bitcoinification of wall street if you will it's not my my favorite topic in the world is the financialization all that but it is pretty wild to me to see the explosion of paper bitcoin summer yeah i should have known you know i wrote the piece bitcoin is the great definancialization that there there would be some financialization of bitcoin before fiat ends and then true definancialization happens but i wouldn't say i was wrong about that it's just you know after pierre wrote speculative tack in

2014 we should have we should have known that this was inevitable and uh maybe that wasn't going to take this form but it's also perfectly logical so i love it wall street and all the kind of financial markets around the world they feel or they feel like they're they're dipping their toe into bitcoin right now but bitcoin is a black hole and so actually they're kind of crossing the event horizon uh without even realizing it so i'm a huge fan of all these different products but yeah i think it is it is a short time period where bitcoin is going to be rapidly financializing before you know to your point to your paper things rapidly definancialize yeah i love that it's drawing people in like jim chanos and that there's probably a bunch of people in tradfi

that are looking at it saying that this is all a scam and what they don't realize is that the bottomless pit of fiat and the arbitrages in the fiat world is actually what's creating it Um, so yeah, if that capital is going to go to somewhere better to go to Bitcoin than some zombie company that was going to be extended just by the fiat system. Absolutely. And I was looking at a chart, uh, I think it was Crucious's chart of, you know, Bitcoin at, uh, $2 trillion in asset class. And then, uh, the different financial markets that are, you know, a hundred X the size of

Bitcoin and somebody plotted all of the different, uh, Michael Saylor, you know, preferred stock products that he's launching and how it taps into these different markets uh and i think that's really fascinating it's yeah it's just wall street you know getting sucked into the bitcoin black hole they think they're in charge but you know we'll see yeah it was it was interesting i listened there was a podcast that michael saylor did where he was in person i don't i didn't recognize guys who were interviewing him when he he basically gave a 30 minute explanation of how they they they basically unintentionally stumbled into this whole dynamic and that it was also then he connected the ideas of why bitcoin's volatility was particularly attractive to these

markets and, and that, um, that it really wasn't a grand, you know, it wasn't an idea that he had when he started getting, you know, interested in Bitcoin and got orange spilled. It was something that they issued a convertible bond. And then through that process realized that there was this whole arbitrage opportunity to suck in and tap more capital. So totally. And I think what Bitcoin is doing right now to a lot of markets around the world, and I think you've spoken about it you've written about this a lot of markets are kind of zombie markets right they're they're running out of steam and that's why the money printing has to just continually happen because it's just like they can't they can't get the growth that they need and bitcoin is like a

shock to the system right it's like an ekg right if the if the patient is is flatlining and dying like as soon as you give a little bitcoin exposure to a market you see like rapid uh rapid adoption and and you know not even adoption but just like attention short sellers go people going long like all kinds of focus just goes right there to bitcoin i think it's really cool yeah that's one thing that he also talked about with that the short sellers serve a purpose for him that they will then be buyers of his stock when they need him to be buyers of the stock and so i think that and then that will be what we you know not that specifically but talking about the incentives of bitcoin that create all that frenzy that ultimately create the demand for is what we'll talk about

today and appreciate you coming on the show this is episode four the the first episode will actually be released next week so by the time this one comes out people have gotten to listen to a few but this this podcast is focused on mining and energy and all and the convergence of bitcoin the money side of it and the first few episodes we're talking about mining in kind of a broad since the last episode we went deep on a specific strategy um in the mining ecosystem specifically upstream natural gas mining off of upstream natural gas you're not a bitcoin miner are you i'm not you're not i've i've done it just uh as a hobby just on a computer just to try it out see how it works but unfortunately i i rationalize myself out of becoming a bitcoin miner and maybe

we can talk about that today i did the same um but you're what you at least in my opinion what i would consider you as an expert in the economic incentives neither of us are economists but we understand the economics of bitcoin very well and i think that one of the things that is easily lost in the bitcoin mining sphere particularly for people who are legacy energy professionals that see bitcoin solving problems in the energy sphere that those make sense but then when they zoom out and then re-look at bitcoin and what is creating all of this demand for power they then get re-lost because they can't connect those things so i think um and this won't be the only discussion on the incentives of bitcoin but i think uh or not i think you had

written an article back when we were still both at unchained i also think that you were my my first hire at unchained potentially yeah i mean i i got the job you know in 2019 i just dm'd you on twitter I think I actually had heard you on either. It was either what Bitcoin did or TFTC, uh, and just reach out to you. And that rest is history. Yeah. We were very close to hiring somebody else. And then your resume came through.

I remember I was in San Francisco, hopped on the phone, um, and, or I was interviewing the other person when I was in San Francisco and I had a doubt and then yours came in and yeah, the rest is history. and soon thereafter i started writing about bitcoin you would read my pieces before they'd be released and give me feedback and then you had written several pieces and i started giving you feedback but one of them was 21 million is non-negotiable and that in that piece you really walk through the logic of why bitcoin didn't have a security problem why the existence of bitcoin and the fact that bitcoin was as secure as it was was a demonstration that the market was working

and then you explain the the mechanisms that actually dictate that and that's a lot of what i want to dive in today to help anchor um combination of miners that are all either They're so heads down on actually getting hashes out of the ground, but don't necessarily think as much about the incentives of the network, as well as people that are new that might struggle to connect where and why all this demand for power is being drawn from the Bitcoin network. so maybe to start if you could explain in your words a lot of power is being consumed by the bitcoin network a lot of people that don't understand bitcoin think of it as waste but how do you think about what's creating demand for all this power it's funny because i think the people who are skeptical about the power usage on the like looking at bitcoin and crypto as a whole uh they they're directionally correct like

a vast majority and in fact in my opinion all of the power that is used in quote-unquote crypto that isn't bitcoin is a waste it's a waste of power the reason that bitcoin is not a waste of power is that it solves a really fundamental and crucial problem in my opinion for the entire world. And that is the problem of money printing. So it's my view that Bitcoin is the very first form of money that is absolutely scarce with a fixed supply of 21 million. Nobody can create more Bitcoin. You can try to make a copy of Bitcoin as we've seen, you know, hundreds and thousands of different cryptocurrencies and altcoins explode over the past 16 years. You can try to make copies, but what you can't do is print more than 21 million Bitcoin. And that's a really,

really significant problem in my view, because money is, is the most fundamental form of communication that humans have. You can use money to communicate value across different cultures without even speaking the same language. It's almost a problem, I think, at a lower level than something like written language or spoken language. It's, you don't even need to be able to speak language to be able to transfer value with people, uh, in exchange. And so, yeah, I think having a really strong, solid form of money at the base of any civilization is absolutely critical. So the reason that the Bitcoin network demands energy is in order to solve this problem of creating a form of money that is absolutely scarce,

it it is tied and it's digital right but it is tied to the real world via energy so as the network continues to grow bigger and become more and more valuable it's going to continue to demand more and more energy now as an energy producer i think that that's an amazing opportunity and we can maybe go into more details there but maybe i'll stop there and to see what your thoughts are yeah So maybe expand on the connection for the demand for Bitcoin, the money, to the function within Bitcoin that necessitates that energy be consumed. Sure. so there's different ways so when bitcoin was created the way that it was issued out into the world was via transaction processing every 10 minutes via a block so a block of transactions

is processed every 10 minutes and in order to process that transaction you need real world electricity and you need that in the form of hashes right so if you're a bitcoin miner if you will you have to connect your computer you have to use energy to generate numbers in order to solve a block and transact and process transactions so that the energy demand at a fundamental level is for issuing the 21 million coins out to the public and processing transactions and then ensuring that anybody in the world can do that and that valid transactions functionally can't be reversed that's right and one of the ways that you describe it from the energy producers perspective or the the bitcoin miners perspective is that they're the reverse side of that is that

they're selling their electricity to the bitcoin network do you think about demand being created by the network itself as one aggregated source or demand being created by miners how do you think about the relationship between the the source of demand the underlying fundamental so the the energy is demanded by the network and the network is made up of people who save in bitcoin people who uh engineer bitcoin miners it's made up of people who run full bitcoin nodes um it is the bitcoin network and the reason that all these people do these things is again they they want a form of money that they can save in that they know cannot be printed right so that's where the value is is like this fundamental value of 21 million and then there's an entire ecosystem of

people that are um demanding bitcoin or using bitcoin in different ways kind of at the at the you know, to gain access to that 21 million. And then the miners, right, are just one component of that. And when I say that they're selling electricity to the network, I always think of miners not really as their own. I don't think Bitcoin mining itself is its own industry, right? Like hashing on a computer by itself is not really important. And as I mentioned before, like for all of the other cryptocurrencies that are using energy to hash and process blocks. I don't think it's important because they're not solving a problem with Bitcoin, I think is extremely important. And yeah, I view it more as Bitcoin mining is more of a component of the

energy production industry or a tool that any energy producers can use and less of, you know, hey this is um this is an entire industry that needs to be uh sprung up like i think i think of asic chips more as you know a demand response tool for energy producers like similar to a battery right but you can flip it off on and off um with a switch and there isn't any energy that's lost through transportation with um bitcoin miners and so yeah i do think um i think it's really it's like a it's a monetary bitcoin's a monetary revolution but it's also an energy revolution yeah i agree with that it's one of the it's one of the other reasons why i'm pursuing this initiative to host this show and record these episodes is that as first and second derivatives

bitcoin revolutionizes both money and energy and i also see i think over time bitcoin mining will go closest to the points of generation and will likely be paired with generators themselves and that doesn't mean just on-grid generators but wherever power is generated um talk about you know one of the aspects that makes this work because you know one of the ways i think about it is that this demand for energy to secure the bitcoin network and its fixed supply is an entirely new segment of demand for power that didn't previously exist and if we if we thought about legacy money systems there's there's derivative uses of energy like the fed uses energy to waste resources but or gold miners you know consumed a lot of energy to get gold out of the ground so

there's always been derivative uses of energy at higher orders to make monetary systems work bitcoin's the first where there's a direct use for for power right the second thing when i what i want to ask is the way that people are paid for electricity in the bitcoin network is permissionless they do the work in advance and they get paid without any counterparty risk you talk to just that dynamic and why that is important to the integrity of the system working yeah and i think it's man there's a lot to unpack there but the first thing is it's not just important to the integrity of the system but it's important for energy producers because now you can go out into you know a green field and start generating

or capturing energy and immediately monetizing it from anywhere in the world right there's there's nothing that can stop you from, uh, producing energy and then monetizing it almost instantly. And one thing that you mentioned is just about the Bitcoin network and how it's like directly tied to energy production. I think it's important. The Bitcoin network does demand energy, but it always demands the absolute cheapest energy available. And so there's a lot of situations as an energy producer where, you know, maybe you're overproducing energy or, you know, the demand for you know for people to heat their homes or whatever is not quite where you anticipated it so yeah you're over producing in a given period of time what's amazing about this is for all the

energy that you couldn't sell to them to to people and deliver to their homes yeah you can just instantly monetize uh to the entire world who of people who want to save in bitcoin yeah i think like making that connection that because it's one aggregated source of demand but i think and you just you made this point which is it's like everyone's taking the same price regardless of where bitcoin mining is occurring and those hashes are occurring they're selling to one aggregated source of demand that is setting the price of power so the miners are functioning all price takers and that creates this incentive that they're all taking the same price that the cheapest source wins um talk about the if you could maybe in terms of the maybe where i'm i'm steering is

towards the permissionless nature of bitcoin and it's censorship resistant that you know why it's important that anybody selling power to the bitcoin network or selling electricity via hashes gets paid without there being counterparty risk like to the actual integrity of the system being anybody being able to plug into it as well as nobody being able to censor the network well it's i think there's a component or a property of money that until bitcoin came around wasn't really well defined and i think it's its neutrality is really important for a good form of money and i think gold is extremely neutral right like if as long as you have a gold mine nearby you can harvest it mine it out of the ground um and and that was one of the properties that that bitcoin

also adopted which is that as long as you have connection to the internet as long as you have energy you can now start participating in the bitcoin network there's no you don't have to go out and ask permission so i think a good counter example here is something like the proof of stake cryptocurrencies so the most popular one being ethereum in order to actually mine in ethereum or process transactions you essentially need to get permission now because you have to have a certain amount of money in order to participate and um what's cool about bitcoin is you don't have to outside of very basic equipment you don't need really anything to get started um this is i think is just a really important facet of remaining neutral right because as soon as there's any sort

of human emotions or politics involved as soon as you have to ask anyone permission it's it's a point of failure and it's a point where um human nature can kind of corrupt it and so yeah super important that regardless of where you are in the world as long as you have inexpensive computer hardware access to the internet you can participate without asking permission we've seen uh places like venezuela where they're going through where they went through really serious currency crisis you see bitcoin miners spring up all over the place and they become kind of like black market bitcoin miners we've seen in china as well um but yeah it's it's really important you know people want to be free people want to be able to save uh without you know permission and oversight

and uh yeah i think just for the the long-term strength and security of the network it has to remain open permissionless and uh give everybody the ability to get on board one of the one of the concepts which we kind of came up at a surface level but i want to spend a decent amount of time talking about because this is one of the key pieces parts of your the piece that you had written um i believe in 2020 or 2021 about why there is always a profit incentive to generate hashes and functionally sell those hashes or sell the electricity to the bitcoin network and um so we'll i want to kind of have a back and forth here but this is where we'll risk losing some people but we'll try to you know kind of go down in the weeds and then come back up to

relate it and make sure it's relational but i think this is a really important idea that you put forward because it will then go into the next part of what i want to discuss around the nature of bitcoin's security model this is one piece of it but a key aspect of that and what we'll get into bitcoin's fee market and its long-term mechanism to pay for power to pay for security explain best you can this idea that there is always profit incentive incentive to produce power secure the bitcoin network and what that mechanism is and how it works sure very deep question so i'll maybe i'll even start at a super high level and talk about what was frustrating me at the time and why i chose to write this article and i think the thing

that um that was bothering me was that there was a lot of people you know outside of bitcoin trying to sell their cryptocurrency or whatever just you know cast fear or uncertainty on on bitcoin i would say well the mining rewards aren't even going to be worth it in a few years to be able to secure the network um and and that just never sat right for me because yeah bitcoin's whole kind of mining and issuance and transaction system is its own market right so it it operates and it operates completely regardless of you know any u.s dollar or bitcoin price in any other currency it's it's kind of designed to be a closed loop where and this is one of the the most critical inventions that satoshi put out there is is that

he created a system that was a closed loop with the only, you know, external or outside resource requirement being electricity, right? It doesn't, Bitcoin doesn't need, you know, a group of people to go through and sort transactions. It doesn't need, you know, the price of Bitcoin doesn't need to be a specific dollar amount before it's secure or insecure. The security and the energy demand of the network scales linearly with the value of the network um and the way that that happens is kind of broken down into a few different components and it all starts at the fact there's only 21 million bitcoin so the reason that bitcoin is so interesting and valuable for people is that it has an absolutely fixed supply that is released on a schedule you know until the year 2140 so you might

think like okay well at some point no more bitcoin is going to be released in these blocks how is it going to secure itself you have to kind of dive a little bit deeper beyond that um to to find the answer but it's in a few different ways so first of all a block of bitcoin transactions is made up of a coin base reward block subsidy that's the issuing of the money the issuing of the 21 million the issuing of the 21 million, and then transactions and transaction fees. So as people make transactions in Bitcoin, they include a little tip to have their transaction prioritized and process. So a block of transaction is a specific amount of data. It's a specific size. And so if you want your transaction processed in the next 10 minutes, you need

to include a tip to say, hey, this is a really high priority transaction for me. and then as miners are going out and processing these transactions they're looking for the transactions with the highest fees right so that they can include in the block and get the largest reward now another really really important component to kind of keep everything uh on track without bitcoin itself being able to keep track of time is this idea of the difficulty adjustment so as computers get better right you would assume that okay the blocks are going to be easier and easier to find and you'll find them faster faster and faster the difficulty adjustment is and technically it's it's a little you know over my head but it it looks at the average of

the last like set of blocks that were found and if they were found a little bit too close together it makes the next blocks to be found more difficult so as computers get better the difficulty of finding and processing the blocks gets more difficult to try to keep that average block time of about 10 minutes all right so how does this all fit in so if you're if you're a bitcoin miner and you're you're interested in mining bitcoin and processing transactions one of the reasons you're probably maybe the most primary interest reason you're interested in this is because you think that bitcoin's value is going to go up in the future and this is going to be a worthwhile endeavor if i can mine some bitcoin today i can i'll have to sell some of it for my operating

expenses but the value will continue to go up over time and i'll be able to make a profit now again the reason that you think it's valuable and maybe this isn't top of mind at the moment is because of its fixed supply right is i think it's always i think it's an important part to like re-anchor to like your expectation of why it will go up is because people can't create more of it exactly exactly um but you don't know what the price of a bitcoin is going to be tomorrow you can see the difficulty adjustment you know that the blocks are going to be coming every 10 minutes and so what what is the number one lever that you can pull in order to out-compete other bitcoin miners it's the cost of electricity because that is the real world input there

and so if you can get electricity that is you know as close to zero as possible or one of the reasons i even got interested in in writing about this in the first place was in 2018 i wrote an article about renewable energy and how asic chips will help kind of revolutionize renewable energy production because i was looking at windmills and they were you know spinning or it was a windy day and someone would just be stopped. And I looked it up and about 20% of the time they are overproducing electricity. And so they have to just turn off the windmill, right? So in those scenarios, when you're generating energy and you can't sell it fast enough, that's where Bitcoin mining steps in. You can sell all of that energy to the

Bitcoin network as close to $0. You know, you'll, you'll, you'll turn a negative return into a positive return and i don't know exactly what the positive return is but that's that's kind of the um that's that's a calculus that you're that you're running at that time it's like yeah and so i think that because one one thing you mentioned as you know computer processing becomes more efficient but also just as more demand you know as more energy you know there's two there's those two levers of mining rigs becoming more efficient but also just more energy being devoted and that bitcoin can functionally absorb all the demand up until the point where it's profitable to mine bitcoin and that everyone's cost to produce is different and so now connected to the idea that

if a lot more demand to mine bitcoin or people value bitcoin less people sell it what ensures that there is always miners out there that are profitable that then have the profit incentive that can produce a bitcoin or that can secure the bitcoin network you know regardless of where that level of difficulty is uh in a way that is below what the secondary market price of bitcoin is sure so we talked about the difficulty adjustment getting more and more difficult but i think you brought it up a good point and throughout bitcoin's 16 years there's been many scenarios you know many times uh where there's been a bear market and the price of bitcoin has crashed by you know 80 or even higher in a few different situations and and yeah if you're mining then

um, it really changes how much profit that you you'll be making or, or your losses. But at some point, you know, if the price of Bitcoin crashes too low, the value of Bitcoin drops too low and the difficulty is too high for you to make a profit, you're going to switch off your miners and sell them. Um, what happens at that time is if the network is noticing that blocks are coming and on average on a longer timeframe than 10 minutes per block, the difficulty adjustment can actually drop. So it'll get easier to mine Bitcoin. And maybe when it drops there, it gets to a level where somebody who previously wasn't profitable is now able to flip on their chips and mine it. But I think at the highest level, it's really just a functioning market for the cheapest

energy that is available, right? And it will always, as long as there are some people who are still saving in bitcoin and transacting in bitcoin they will always pay a market rate for energy to be able to secure the monetary policy and make transactions because of the difficulty adjustment rebalancing if the price drops or if the price increases or if computers get better um it's a like a fully yeah closed and calibrated system yeah and there's one thing that um that made me think about which is like say that the the amount of combination of energy or processing power declines by 20 percent and you're a low cost producer of energy that's securing the bitcoin network and you can continue to run profitably at a hundred percent clip you would

on average get 20 percent more bitcoin such that if the price of bitcoin dropped by 20 percent that induce this reduction in the overall demand to secure the bitcoin network you're you're being rewarded with more of the the nominal resource that's right um and you you made this comment i think i think it's a really important one which is that like we all accept that the dollar is still the unit of count and the consequence of that is that putting nominal units of bitcoin into dollars is almost like necessary to our subconscious but that the bitcoin network does not actually have any concept of the outside world or in terms of value the the one piece of the outside world that is piped into bitcoin is that underlying energy demand converting to hashes on a computer

and these bitcoin miners being able to measure the rate of of incoming blocks and then having this self-regulating system and it's like and i want to get your thoughts on this because it's it's a bit of a rabbit hole that there's some relationship between the demand for bitcoin and the pricing of electricity in bitcoin terms like basically like one way to think about is as the the price of bitcoin goes up your if you have a fixed contract for electricity denominated dollars your bitcoin denominated electricity price is actually going down um but if you could like talk about that like the dynamic of and again with that and i mean well it's impossible not to get into the weeds but this this idea that that miners are are all independently able

to determine what the the difficulty is without relying on on uh single sources of truth basically how they how they derive at the calculation of what the difficulty target is and how that might impact their view of their own profitability. Sure, so everyone in the world is able to run the Bitcoin software on a relatively simple computer at home and you just download it.

It syncs the entire history of transactions. It's called a full Bitcoin node and you can download it from bitcoin.org. There's many different places you can download it. But once you have a full node, you can start to really explore, uh, the network. And one of the things that you can look at is the current difficulty adjustment. You can look at, um, I think, you know, I'm, I'm not sure all of the, the different calls that you can make, but you can really explore. Yeah. That intersection

of, of, Hey, here's where the hash rate's at. Here's where the difficulty is and the anticipated difficulty adjustments. So you can typically anticipate, you know, whether the next adjustments can be 10% harder or 10% easier, uh, just by exploring the current status of the network on a full node. There's lots of different websites out there now that have great visual visualizations of all of this. So you don't even need to necessarily run your own node, but, uh, in order to be as permissionless as possible, uh, you can actually just check yourself and verify the status of the network. Now, um, shifting a bit, but talk about the relationship. Cause you, You mentioned it before, but in a different context of there's the concept of the issuance

of the 21 million supply, and then there's what you referred to as tips or the actual transaction fees that people are paying to miners as they send Bitcoin transactions. In the piece you wrote on 21 million is not negotiable, you have the idea that the network itself is paying via the the bitcoin that are actually being issued the 21 million supply and that the the users who are sending transactions but just talk a little bit about that the distinction of the relationship and where i'm going then is you know what your framework of thinking and what the underlying incentive is that dictates that there will be this fee market But first kind of lay the dichotomy of how you view who's actually paying the miners between those two different levers.

Yeah, I was actually going back and just reading the paper and one of the cooler charts that I put together at the time was kind of the percentage of the entire Bitcoin economy that was mining versus other use cases. so now you know mining is is just one of many different facets of the bitcoin economy and it makes up a very small percentage you know overall like mining is still of course extremely important and it's probably you know orders and orders of magnitude larger than it was um even five years ago when i wrote about it but as a percentage of the overall bitcoin economy it kind of continues to um either get a little bit lower or it's kind of like stagnated around like a few percent but that wasn't always the case so for the first um the first four years of bitcoin mining bitcoin and the issuance of of the the tokens into the economy was like 60 percent

of the bitcoin economy it was mostly just hobbyists that were mining bitcoin to play around with it and so over time the issuance gets less and less important and what becomes more and more important is that people are using bitcoin for transactions and now you know the question is always like well how many transactions do we need do we need to have for bitcoin to be safe and again i kind of point back to well we have a functioning market and and we don't have to worry about the specific number of transactions or how, how, um, how full a block is because if the value is demanded more, uh, the network is going to demand more electricity and there will, you know, with the difficulty adjustment, we'll always make it profitable for somebody to mine

Bitcoin. And then the opposite is true as well. If the value crashes, um, it'll demand less energy. So the Bitcoin economy has really evolved from the first epoch, which was the first four years where mining and issuing the money was like the primary, uh, source of the economy. And I think you can even look back at, you know, companies like Bitmain really being massive, massive players in Bitcoin and being able to kind of, um, set the direction in a lot of ways, or at least they tried to set the direction in many ways. And now they're of course still a large company, but they have way less kind of political influence, I would say, now than when they did back in 2012, 2013, 2014, because mining was a much larger component of the Bitcoin economy.

I guess for the second part, it's, hey, how do we ensure that Bitcoin always remains safe? What I think about now is I think about the block subsidy, the block reward, as value that all the savers in Bitcoin are paying every 10 minutes for people who are sending transactions. Right. So it's almost like a subsidy by by just holding Bitcoin right now. And with Bitcoin being issued into the economy every 10 minutes where, you know, the savers are creating a little bit of value and subsidizing the production of that next block. So I just think of it more of as like a block subsidy that everybody is paying right now and over time it continues to be a smaller and smaller subsidy and so the the the burden of the fees just goes to people who want to send the

bitcoin um so instead of a kind of socialized system right now it just becomes more privatized and as long as anyone is sending transactions the market will find the right fee for somebody to then want to go and sell energy to the bitcoin network so i was gonna go one way but then you said something made me think about just zooming out to the high level again before i go deeper down the rabbit hole is um connect the the relationship between the enforcement of the supply to this mining process and the um the reason why cost in your mind is important to say the integrity of final settlement of a bitcoin transaction or just like if someone's kind of tracking but then they suddenly you know wake up and they're like okay wait but why does why is all

this power needed um just like reinforce that that side of like how um as miners are following along with this schedule and you know hitting difficulty targets which is an esoteric concept in itself um how they're also enforcing the fixed supply at the same time and how when transactions are sent why um they can't be invalidated once they're validated sure so so if a miner so the miners i kind of view them as like uh they're they're in a lot of ways in service to this the rest of network and and this fixed supply because as they're going through and building blocks of transactions and you know trying to hash to to process the transactions um they you know they have an opportunity to try to cheat right they can say maybe i'll just like give myself a little bit

more bitcoin as part of the coinbase reward or maybe i'll just um you know include you know i'll try to double spend a transaction or something like that as soon as they if they if they solve the block and try to propose it to the network everyone else who's running a full node on the network will see that they've tried to cheat and basically kick the block off and banish that user so and mining bitcoin as many of you i'm sure know is extremely expensive right so there's a very real cost to trying to cheat the system as a miner the best the best thing that you can do in my view is just try to maximize transaction fees and and process blocks as efficiently as possible um but yeah they're they're you know just like with anything there are ways that people can try

to cheat but what is amazing about bitcoin is just how rigid the rules are and how effective they are at preventing cheating that kind of answer your question it's on the on the fixed supply and then on the transactions kind of why cost is important to if you've sent a bitcoin transaction to somebody a bitcoin miner mines it validates it um why is the the mining function the cost associated with it critical to ensuring that that transaction isn't reversed sure so mining it um so so the block then gets so once a miner has has you know proposed the block constructed it um you know hashed and and solved the block solve for the block it gets added to what's known as the blockchain right which is just a chain of every single transaction that has

ever happened in bitcoin and so you can you know you can go back to the from the very first transaction until you know right now and look at every single transaction that has ever made and now cheating that system is extremely difficult so in order to cheat and like kind of double spend is that what you're trying to get at kind of or or what not necessarily even double spending but like why it couldn't be reversed um like once a once it's in a block and we're on to the next block yep so so as soon as the block is solved and it's valid right so i talked about when you try to cheat and you have an invalid block and it gets kicked off as long as it's valid it spreads out to the entire world in seconds or even you know probably less than a

few seconds milliseconds right and so every single node in the entire world is now verifying hey yeah this block looks great i'm adding it to my database and now i'm not going to accept any invalid blocks um there's a lot of different kind of theoretical uh attacks when it comes to mining and there's there's times where um you know somebody will mine a block on one side of the world somebody will mine a block on the other side of the world and they're both valid and then in that scenario um it's really like whoever mines a block uh that is subsequent to either one of those blocks where that chain becomes kind of the source of truth yeah this is i think it kind of gets a little bit in the weeds here so yeah that's fair and where i was going though then to um

connect for people is like hey the reference to your 2140 maybe it's 2139 depending on how much power gets devoted to the network and the rate at which but when there's zero bitcoin newly bitcoin being issued or another contract that you have is that they're all already issued we won't go down that rabbit hole but um that the miners are still at that point in time enforcing the fixed supply and all will be left is the transaction fees right you previously mentioned the concept of a full block explain that less technically and more substantively why that dynamic or what that dynamic is that ensures scarcity and bidding to um and maybe also tie it to the the fixed supply and like just a demand for the network yeah these are big questions so

i would kind of then go back and say all right so this is all again at the behest of the 21 million supply the entire reason of doing um all this mining and and really everything that we're talking about is to ensure that the the supply remains at 21 million another extremely important component of maintaining that fixed supply is that the network continues to grow in decentralization And what I mean by decentralization is that not just that the Bitcoin itself is given into the hands of more people, like that's one form of decentralization, I would say, is more and more users, but also more and more people who are running the software at home, more and more people individually mining, more and more mining pools, and so on. So everything about Bitcoin, uh, ideally should be increasing in decentralization. And that really helps to kind of anchor and, um, cement the fixed supply of 21 million. So, uh, I kind of lost my train of thought here, but the full nodes must be, uh, growing

in decentralization. Otherwise, like if the network starts to kind of reverse and start to centralize, then it ends up being like i think a security issue and a point of failure um let me phrase it a different way which is there's eight billion people competing yeah for block space sending trend you know they they demand uh a currency that has a fixed supply that there's a fixed amount of block space block space right and that will so yeah to talk about that dynamic and then we'll talk about how after that you know your idea that you put forward why why inflation could never be a solution yeah sure So the reason I was talking about why it's so important that decentralization increases is because there is a real world cost to running the software at home.

It does require, I think at this point, over a terabyte of memory and it's going to grow faster. And the reason that it grows faster is that every 10 minutes your computer is adding an additional few megabytes of data and it has to store that forever. so the reason that there is a kind of marketplace for space in the next block is that you don't want to overload people's computers at home and people's databases with too much data right so it's very important that there's a very limited amount of data added to the blockchain every 10 minutes and so that also creates the the fee market and the transaction kind of bidding market that is really important for bitcoin's longer term success after the subsidy goes away um that you have to you have if your transaction is important you have to bid against you know everybody else in the

entire world uh who wants to settle their bitcoin in 10 minutes to fit in that few megabyte uh block of space and yeah this is something for me that i think is just absolutely critical is that we maintain a really small like as small as possible block space and try to engineer our way around how to how we can cram more value or more transactions or more data um i guess not more data but more value into a limited amount of data and it's it's again you know going all the way back so that we can help secure the supply of 21 million by ensuring that bitcoin continues to decentralize in every way possible and people running the full software at home and being able to validate and review transaction is an absolutely critical component of that and the component of

that that's really important is that the amount of new data added to their computers every 10 minutes is as small as possible yeah and it's finite and it's known yeah um and that also allows for the the predictable rate of growth that's right um if you look at you know other other cryptocurrencies out there that have tried to cram more data uh into the into the network or the blockchain like they all end up really heavily centralized um only the most kind of advanced server farms can like run uh run the nodes because it's trying to compute and store and transmit so much data so there's there's two typical lines of for lack of a better term fud of concern and this could be people that have been involved in bitcoin for a long time that are bitcoin miners or it

could be somebody who's looking at bitcoin for the first time that's considering mining bitcoin or just owning bitcoin and and trying to grapple with the integrity of the system one is that this fee market won't exist or won't be sufficient we've kind of talked about that in two different concepts why there's always a profit incentive and to sell electricity and that will hold regardless of where we're at today versus in the future because of the network having this self regulation right it doesn't it doesn't require any other external currency outside of energy in order to be able to regulate itself yeah and then the other thing that that comes up as relate in relation to this is well we're going to need to create more money because we don't know

that this is going to be sufficient so in the piece that you wrote you specifically talked about why inflation can never be a solution to this problem explain that concept yeah inflation uh we live i guess it's kind of like um we've just lived under this inflationary environment for so long that it's it's almost hard for people even even staunch kind of austrian economists to to really grasp this idea that you actually don't need any inflation you want zero inflation because money is like a ruler right and you want the ruler to be the same length always so you can measure value effectively and transfer value um but there's there's always there's always a few folks who just think that okay well i'm you know i'm feeling nervous personally about you know

transaction fees not being quite enough like what if we just what if we just you know add a little bit more bitcoin uh you know to the block rewards and just change it a little bit over time add a little bit of inflation and this this like would throw the entire system uh out of whack because again we're building we're doing all of these things in order to support the fact that bitcoin has a fixed supply of 21 million the entire reason that we're here talking about this is because bitcoin has a fixed supply of 21 million if you start tampering with that the entire network gets out of sync um there's been many cases of people who try to tamper with very kind of minimal um aspects of bitcoin that ended up being seen as a as a totally separate currency

and and this would continue to happen in the future but whenever you tinker with it there's a split and then economic actors have the option to hold both sell one sell both and so on and when you when you make a change in bitcoin like adding inflation for example it would create a split in the network i would be given bitcoin and bitcoin inflation and then i individually have the opportunity to be like all right am i going to hold bitcoin inflation or am i going to hold bitcoin and what i've personally always done is whenever there's a split like that i always sell the one that i don't believe in immediately all of it right and buy more bitcoin um this has happened again like many times throughout bitcoin's history bitcoin cash being the biggest example of that

they weren't trying to add inflation they were trying to change one little component of bitcoin but the market kind of viewed it as a form of inflation in a lot of ways because again i was given control of two different forms of money there was one that i believed in one that i didn't believe in. And I sold the one that I didn't believe in. So anyways, adding inflation would not only, you know, just completely break all the incentives and all the markets that exist right now, but it would also create a separate currency or separate form of money that economic actors would then have the option to sell. And so the market would very quickly punish the person who tried to create inflation in Bitcoin. And it would extract kind of all the value out of people

who believed in bitcoin inflation and the value would accrete back to bitcoin itself yeah i think that's really important to to anchor someone who it's easy to get lost in these layered ways in terms of the bitcoin network actually works i do think it's critical for somebody to think about them to understand them to tie everything together but to not be lost in the fact that the very basis of value right the reason why all this demand for power exists is because the thing of value is the money that can't be printed that's right and that the solution can never be undoing the primary that's right value proposition and it is funny you brought up because bitcoin very much is of the austrian school and i didn't even realize this through my time of

writing but i've got you know there's this one particular troll on the internet who will say things like hayek wouldn't have said that a fixed supply is necessary and uh i've seen people argue that misis wouldn't have liked uh bitcoin because he wrote about like commodity monies only and i'm like yeah it was a hundred years ago like yeah nothing like this could have even existed it's like we now live in a reality where this market exists and that the market gets to decide rather than the theory be debated which i think is one of one of the great things about bitcoin in general is like back you know 100 years ago where the debate between austrians and keynesians it was like it was a it was an intellectual debate and the keynesians won and their policies led the world

into the brink and now we have a market test that everyone can voluntarily opt into but being very important to realize that the thing that makes everything work is that and that aligns everybody the one thing everyone has competing interests everyone is adversarial to a degree um not necessarily everyone but from a functional perspective of the market but the one thing everyone agrees on is the fixed supply and in my view it's it's the one thing in in this was part of your the core part of your piece which was 21 million is non-negotiable that that is the the social consensus and that in my view i want to get your thoughts on this that that is the one thing that bitcoin would hard fork to protect if some if there was like an inflation bug or

if somebody it wouldn't just be like oh well now the money exists that the thing that ties it together and part of the enforcement of consensus is 21 million but that's also because it's its basis of value yeah i think i even wrote this in in that piece or the one before it all 21 million Bitcoin already exists, but even assuming that there are more inflation bugs that are discovered in Bitcoin, you know, maybe for the listeners who are newer here to Bitcoin, Bitcoin actually had an inflation bug. I think back in 2013, um, it was patched very quickly and the market, it wasn't just like one developer who's like, okay, here's the fix. All right. Um, the market itself rallied around preserving the 21 million supply so in that scenario where the inflation

bug was uh found and patched it did in fact you know it would have in fact created two versions of bitcoin bitcoin inflation bug and bitcoin and the market then has that choice and so i think um it's and that was specifically for the one if it's the one i think you're talking about where once it got done with the 21 million it would restart over i'm not sure i don't remember the specific one yeah but there's been maybe a few inflation bugs and and yeah and it is software and so i think we can anticipate that there will be unforeseen bugs in the future and that doesn't even scare me though because i'm an economic actor right in that situation where you know there is a split in the network or there is a bug that's found there will be another version um that is

you know forked off or you know depending on how you think of it like continues the original idea and then i'm given control because i have keys to bitcoin i i hold keys i'm given control of both splits and i get to decide what to do with them and so as a rational economic actor what i will do is sell the buggy one for the one that preserves the supply uh and yeah there will be other you know forks of bitcoin in the future and i think um i think it will inevitably create forks and then we'll just see it's just a market test yeah i think and i also it's similar how i think about it and then for anybody evaluating it's like hey 99 out of 100 people would they opt for the one for the version of bitcoin that preserved fixed supply versus any alternative

yeah i think i think this whole and i already touched on it briefly but really one of the most critical events in bitcoin's history was uh when bitcoin cash forked off of bitcoin and there were two very similar but competing versions of bitcoin that existed at the same time in the free market and the reason that that's so important is you can kind of just run that uh you first of all we saw what happened like very rapidly uh bitcoin cash tanked in value relative to bitcoin and now it's not even i don't even it's like a minuscule fraction it's essentially there's still people out there that swear those poor souls um but uh contrarians till the very end but but but you can just see like all of the hash power moved over very quickly

moved over to bitcoin um you know there was still quite a bit amount of hash power on bitcoin cash but it was all subsidized by the kind of proponents of Bitcoin cash. And they could only do it for so long because you really can't outlast economic reality, right? Yeah, and that's an important concept of that was the market set of value on one versus the other. And that connects into that idea of what the market is willing to pay for power. That's right.

right and that the the market bitcoin increasing in value or if there's a if there's a split or someone proposes a change and one is described more value than the other then it is a pure economic demand for power and if you have a fixed cost functionally as a producer as a miner you are going to mine what the what the market value is the most absolutely yeah you'll see very quickly the value in in the you know subsidy if there's any subsidy remaining or the transaction fees that are being paid and yeah that will dictate you know a you know good business decision there yeah and i i tend to agree i don't i'd have to give it more thought in terms of singularly was that the most important i don't know i don't know but like i was i was like bitcoin had just started

to click for me at the time so i was more of a outside observer than i'd say an active participant in the debate for sure i was not but but observing it and then and then looking into the future there hasn't been a contentious hard fork yet and my my assessment is it was like there was change bitcoin versus not change and that even though it was something that yeah might have been marginal i mean there were good arguments for why it wasn't marginal it wasn't marginal for me but like in the grand scheme of things it wasn't like they were trying to add inflation to bitcoin which would be a way crazier change in my view right but that once if it were established that you could change a core rule then you follow that down the path it's

well we've we've set a precedent and yeah how do i know something more significant isn't going to change there's always going to be a future bigger emergency yeah um now and this is kind of along the same lines of conversation but we might need to connect it for folks i'll ask the question and maybe then elaborate but it says does the bitcoin network need to quote create more use cases for bitcoin to drive fee rates i think when people talk about well you know you we need more monetary use case i'm not 100 sure what they mean other than create more transactions how you think about like the um engineering of bitcoin or potential debates around changes to bitcoin as it relates to um creating more demand for bitcoin like the relationship between

changing the surface area of how bitcoin works for this idea of creating use cases or demand yeah that one's a it's funny it's like i can i can give my opinion on it but i think that's just it at the end of the day it's an opinion and everybody has their own kind of opinions there right and it's like we need to create more use cases no we don't need to create more use cases if you individually feel like you want to create a new use case like go for it but there is no real we here in bitcoin like i think a lot of people think that there's a like a small group of people who kind of control everything and i i still don't believe that that's the case um and i definitely don't think that you know any any one company or individual is going to

be able to have the political sway to uh generate more demand or different types of demand for bitcoin i think people it's funny it's like you know in the national forest or whatever right you have these beautiful uh you know in the redwoods you have these massive trees or whatever and somebody like carves like you know phil was here on one of the on one of the the trunks i think it's just like humans kind of have this um desire to like you know leave their mark on something and i think it's kind of what i think of when i think of like the whole ordinal debate from last year or whatever where it's just like the blockchain is this beautiful redwood and it is so pristine and glorious and like yeah somebody's gonna want to come up and just carve you know whatever

ordinals were here and you can't really stop them um it's not what i would choose to do um i don't think that like architecting new and different use cases for bitcoin outside of it just being a great form of money is required for it to succeed behind beyond its wildest beyond our wildest dreams but like i know that my opinion there isn't going to stop somebody from doing it And so I don't know. I don't really. Yeah, I think like my answer is no, we don't need to figure out more in different use cases for Bitcoin. If you feel like there aren't enough transactions happening, one of the best things that you could do is start making more transactions or sell a product for Bitcoin. That is just so good that you can get people to part with their Bitcoin and send transactions. But outside of that, no, I don't think we need to like really do a lot of additional engineering there.

Yeah. And I think it's, it is good to reinforce that there is no we. Right. Right. And that it is the market. Yeah. And it's so funny. It's like some of the articles from altcoin marketers are like, Bitcoiners need to figure out this security budget issue. And it's like, first of all, who are you talking to? Like Bitcoin is, you can't just like talk to gold. gold needs to figure out how much gold there is like you don't say something like that right it's like um i guess it's they're really just it's like an affinity scam where they're their product is

extremely centralized and so they have a small group of people and so they're trying to like show that bitcoin functions the same way when bitcoin is extremely different but uh yeah it's kind of like pissing into the wind like bitcoin needs to do this like all right yeah and and so So with that kind of framework or heuristic that there is no we and realistically you can control what you can control. You know, if there's a fork of Bitcoin, you can sell it. if you're running a node you can run certain code that the market does have a you know in different ways a decision-making mechanism how do you think about the risks of centralization in bitcoin to the integrity of the economic incentives because it is both true that there

is no we and you're only in control of of i yeah and that could be selling goods and services for bitcoin and sending bitcoin training that decided to pay in bitcoin like there's a lot that you're in control of but that there still is this market mechanism that adds up centralization in bitcoin is and you mentioned earlier that decentralization is important but speak to like tying the economic incentives together and and bridging the gap between hey there really truly is no we but why centralization risk could potentially distort incentives or if you don't see risks that you know it's like centralization is is in any form i think is a big risk in bitcoin and so when we're when we're thinking about like more use cases of bitcoin

that's that's the use case that i want to see totally eradicated it's like the somebody who's trying to co-op or send centralized bitcoin like the more engineering time and energy and resources we can focus on um eliminating those kind of like centralization choke points that's that's where i think you know i i would spend most of my time if if i could you know engineer bitcoin that's what i would focus on is like different ways to increase decentralization because um you know decentralization is it's so funny it's it's not binary at all it's not like a you are centralized or you are decentralized it's very much a spectrum and so in my view what's really important about bitcoin's decentralization is that it just increases in any in any and every way like

more miners more users more nodes um you know more transactions like all of that you know we saw what 80 000 bitcoin moved last week and then i think just today we learned that like 30 000 of it was just sold or something yeah um i love that i love it right that is 30 000 bitcoin that are now being decentralized further out into the ecosystem they'll never get them back um maybe they will but um what i love to see is yeah just just large og holders that are starting to sell um that's how the the units of bitcoin actually decentralize out into the hands of different people but yeah decentralization in all facets is really where i'm at yeah and i agree too with the idea that well they really or the point that you mentioned about we never know how much

decentralization is enough that and you really can't know whether bitcoin's sufficiently decentralized to resist some threat until the threat appears you know and you could think of that as someone hard forking bitcoin and doubling the block size or proposing any change to bitcoin and whether it's followed or not and then the other aspect of it though is is that there are areas of bitcoin that are more centralized or less and so while it's always an endeavor without there being central coordination to advance different aspects of bitcoin that are potentially more centralized and less and efforts to increasingly decentralize those without knowing what the defined bogey is but um and mining is one of those areas where there are centralization

risks like questions specific to there yeah like if there were risks there from a centralization perspective in your mind what would they be and then also like what makes you sleep at night that you know doesn't doesn't cause you to lose sleep because you understand the incentives a bit and why you think the incentives of bitcoin are secure despite those potential risks i think you know mining itself is the actual act of like plugging in asics and selling hash electricity the network is pretty decentralized what is more centralized than i would like is the number of mining pools that are out there so the way that it works right is if you have a single computer single asic and you want to mine you point your hash rate towards what's known as a mining pool

and the mining pool is the one that actually constructs the block and says all right here's a block that we're all going to be working on your individual uh computer chip is going to be focusing on um processing that block so there's a very limited number of mining pools out there and they're set up in different ways with different payouts and i think we you know what i gather is that we've kind of settled on the best way to pay out individual miners, or at least like the most practical way to pay out individual miners. The problem is, is you're trusting the mining pool to actually be honest with the transactions that they're including in their block. You're trusting them to not be taking like a bunch of fees on the side to put a transaction

in that you might not have really wanted included, or you might not have wanted to spend your electricity on and uh and they're they're a lot of the mining pools are kind of under the control of just a few different like larger organizations so i really think uh there's a lot of good work being done uh to to decentralize that right now um stratum v2 is the one that i'm most familiar with and i would say i'm relatively unfamiliar with it but the way that i understand it is that with stratum v2 you individually can construct your own block and then contribute your hash but still be able to contribute your hash power to a mining pool a pool of asics but you're able to really define what goes into your block so i think that would be a tremendous uh help for

decentralizing mining what allows me to sleep like a baby today is that the actual asics the chips themselves and the places that are running the bitcoin mines are extremely decentralized and if they catch wind that a mining pool is trying to stiff them on on fees or is acting maliciously they can very quickly point their hash rate to another mining pool. Again, I wish there were more mining pools. Yeah, where I was going to ask there, if there's few mining pools, that seems to be the crux of it. It's like this idea that you can change,

but if there's relatively few and they're in coordination, is it practically? Yeah, I think that's a good question. I think if there was enough of a suspicion that the mining pools were behaving maliciously it would be relatively straightforward to set up your own mining pool um it's just again the mining pools are pretty well understood how they function and how to best operate them i'm sure you know i'm way oversimplifying there but uh because it's permissionless you can still set up your own mining pool and start uh pointing your hash rate

there uh and these aren't you know these are big problems but they're not catastrophic problems like setting up a mining pool is not a huge barrier to entry in the worst case scenario um but yeah i do think that the engineering that goes into kind of decentralizing mining pools is very valuable uh right now yeah and you know one of the ways i think about i want to get your thoughts on this is that there's a view of it that is that it's always the marginal next block and i can switch and so the the perception of the risk as a as a bitcoin miner or somebody that isn't bitcoin mining that is a stakeholder network because they own bitcoin it's like well if if one becomes compromised or if and that might be um you know siphoning

off fees that are out of ban and not you know properly rewarding the miners that are actually hashing but it also could be you know running different versions of the software and it's effectively not including specific transactions yeah there's this parallel to you know if you have your bitcoin at coinbase coinbase is running the node for you and they're basically deciding what's yours and not and you might say hey there's the rule of law and you know i i should be able to get to choose this after the fact but if they make a decision you're you're in this position of weakness and and if it's your funds if you say if it's your life savings it's all or none right with bitcoin mining there's this view that it's not the same because it's the marginal next

block and if something happens that we can change but if you do you see a parallel there you know of like the individual hashes pointing at the aggregation point being the pool and the, you know, holder and the incentives with someone like an exchange in Coinbase. I got to say, I think the using a custodian for Bitcoin is a significantly higher risk for your Bitcoin than than mining pool centralization.

I think that it's predicated on the idea that you could switch and what like what function what if you functionally couldn't at the time that you needed to in the sense that you might be able to change but what if all the large mining pools are in coordination just that changing doesn't really um have the impact that you were expecting it to like does it is it then more similar i know i know that like there's always going to be a difference because you have some option but like if they have your bitcoin they have your bitcoin right i know it's never going to be the same acuteness but um yeah it's i mean it's a tough hypothetical right because like uh you know okay so all the mining pools start colluding

and don't include you know a transaction like again in that situation there could be a time period where you're saying you just say hey i gotta turn off my my chips and like not devote any hash rate to this during that time you know it's a couple weeks or whatever maybe you spin up a mining pool and say all right here's a mining pool here's we're you know stratum v2 we're verifiably uh honest or whatever um i think you would see rapid adoption there right because it's like again you know that's where the kind of human politics come into play where i don't think that you know bitcoiners and miners around the entire world are just going to sit and let a few organizations um corrupt the system right forever right yeah like one of the things i'm getting as

like do you think that is there in there was a quote i don't need to i'll read it because it's the same thing that i would have i would have said yeah the thing whereas like as a result of fixed rules fierce competition increasing scale and specialization bitcoin mining becomes more decentralized over time with further increased security mining pools in my mind have become more centralized over time, which is, again, I would have, I have, I would have had the same exact view of you. And it's like the thing that I would have expected to happen has not. And it is difficult to see how, you know, in that idea that like one individual making a decision doesn't influence it is it is it something like a mount gox or the pools that incentivizes

this distribution where where greater um risk is ascribed of like the tail risk that that forces a cleansing of the system in a in a more decentralized version or do you think that you know people look forward and say hey it's not in any of our incentives for this degree of centralization to exist as miners and force the change prior to um some yeah i think okay i think i think it it happens before it's not going to be like a catastrophic malicious mining pool breakdown i mean it could be but i do think you know if you're marathon or riot or whatever and you get so big that you're running like a significant chunk of a mining pools you know marathons credit they do but i think they run their own program i think

like where you're going is right like the the riots of the world or the core scientifics of the world yeah um if you're if you're getting large enough you know from your bitcoin treasury operations that we started the whole conversation with that you're now running a significant chunk of a pool's hash rate like yeah it's going to be in your economic and uh it's going to be your economic best interest to just like create your own pool um and then you can you can verify exactly what transactions are going into it so i think you know and this is all this is all in this like hypothetical situation where you know new technological breakthroughs don't come out like maybe stratum v2 just becomes wildly popular and in the next few years and um and super easy to use

and then it just becomes no-brainer like i think a vast majority of individuals who are mining are going to just go with the solution that is uh the most profitable and easiest right and until they're large enough and then it's like okay we have to figure out because this is like a major business risk to us yeah i think that's that's key it's like where when it becomes apparent to them that it's a business risk yeah and you know with the existing state of the market it does become logical for those largest to to move first um well i think i've covered everything i want to cover um the last thing i wanted to ask is um as part of summer of phil and you know we both were at unchained and you know you after me achieved some serious milestones there 100 000 bitcoin on

the platform um now uh shifting your attention elsewhere what are the things that you look out in the world of bitcoin that that interests you that you're focused on you're now an advisor to um branta branta yep branta um that helps improve the security on sending on-chain transactions or maybe in general but just um what what's on the horizon what what's what's piqued your interest yeah well i mean my time at unchained is uh has been absolutely unforgettable and yeah achieving like over a hundred thousand bitcoin secured on the platform and over a billion dollars of lending originations and um the company itself is just a rocket ship i mean it's it's awesome and loved my time there but yeah i have had a nice kind of couple month step back um to really reevaluate

what i want to be doing and um posted a couple you know tweets out there and got a lot of really awesome um inbound interest and i would kind of break down the different categories into like um new bitcoin collateralized lending products uh new technical bitcoin uh products and new kind of financial uh or tax advantage bitcoin products as well as you know like the bitcoin treasury companies um so those are kind of the different categories of folks that i've spoken with. And, um, why I decided to join Bronte as, as an advisor, um, is because it's solving a problem that I think is actually near and dear to both of our hearts. Like we, uh, I was, I was reflecting back on it, but Unchained has a feature where you can, before, you know, sending Bitcoin

into your vault, you can verify that you have the keys to your Bitcoin address by using your hardware wallets. And one of the reasons that, uh, we worked on this, uh, together back in like 2020, I think, is because there was a big discussion at one of the early Baltic Honey Badger conferences about malicious browser extensions, swapping Bitcoin addresses. And so we're like, OK, you know, Unchained was already very secure at that time. But adding the ability to actually confirm offline that you have your address and you can see that you're about to send to your real address and not some attacker was a really awesome competitive advantage for Unchained. So when I met with Keith from Bronta, he was solving the

problem in a very similar way. Bronta gives you an additional verification before you send Bitcoin transactions around that the address that you see on your screen is valid. Now, it's never going to be quite as strong of a verification as confirming that you control the keys to your address with an offline hardware wallet but um the problem with just confirming that it's your address is that when you want to send to somebody else it's like well how do you confirm that that address dear to us working at zap right of bridging this gap to be able to make payments more secure yeah exactly so i met with keith and this is just a problem that i've uh been really passionate about um having brought address verification uh or helping popularize it at unchained and he was

solving this problem in a really novel way for, you know, both inbound and outbound transactions on mainnet and lightning. Um, the first release is actually available now. It's a pretty lightweight and privacy preserving release, but essentially at the moment that you're about to send the transaction, you'll have a button that says verify with Bronta. Um, the, whatever company you're working with they'll at that time uh like ping bronta's servers with an address and then bronta will verify that it is uh valid and show you yep this is a valid address or no and specifically what it's designed to protect right now is like zero day exploits and browser extensions um there's a more kind of robust product that keith is envisioning um but yeah even the first version

of it is just like a really great double check um before you're moving around transactions i think of you know you know it's not just valuable for like an individual it's also valuable for exchanges moving funds and settling across it's like hey about to move i keep using 80 000 bitcoin but that's kind of the topic du jour you're about to move 80 000 bitcoin michael saylor wants to move his 600 000 bitcoin that's right off of an exchange and yeah you know into the keys that he controls he's you know he's going to need well yeah he'll want to you know confirm that he holds the keys. And then, you know, any other verifications that might be available to him is probably worth just doing a double check. Uh, and that's where Bronta comes in. So yeah,

really excited about, uh, that service and, and, you know, Keith is a rock star. I've met him a few times and, and like, we just were really aligned on this problem. And so, yeah, I was happy to join as an advisor. Um, but yeah, I'm still just kind of in discussion with a bunch of different organizations and, uh, thinking about whether I want to just remain an advisor for a bunch of different companies or go full time with uh with one and yeah just kind of seeing where things are at right now it's been a really exciting few months well i was trying to take a break and then i was like got too excited hard to do that in the world of bitcoin yeah i do think that uh like one of the things i like people need to send a bitcoin transaction like to themselves on on

chain do all that validation to really understand the power of it but then as you're getting more active and you're actually sending real value around versus just tests it's um it you got to know you know it's a it's a it's a learning process and it's almost the the more you know the more the more you know and and that drives this idea of why bitcoiners are so adversarial in their thinking to create solutions that help make these problems that are daunting um more consumable yep and i think it's awesome yeah i think um it's funny a client an old client at unchained he called sending bitcoin transactions like the pucker factor like you always just have like like okay i have like your blood pressure is going to spike a little bit like you know

especially if you're moving around yeah real amounts of value on you know for yourself or on behalf of your clients like you just want to you want to make sure that you're verifying in every through every channel that you have available right so if you're looking at a browser and you're about to send your life savings like check the address on a mobile app check the address with bronta check the address on your on your um device you know before i left unchained actually implemented confirming via email as well so when you see a confirm on device button in unchained you can also confirm via email you get a little email but all these different verification channels are just really they they add up to uh feeling a lot more confident that

you're not getting you know attacked or scammed yeah and i think you know particularly um if you ever send to river or strike there's no way to do that you know and it's and it's not because of any faults of their own it's just if you can verify it if you have the keys but if you don't have the keys that that you need to rely on um tools like bronto so that's right um that's awesome well center of hash episode four phil thank you for coming on um and i'll probably need to bring you back on to dive into some of these concepts again at some point in the future absolutely parker thanks for having me man and it's funny you're in bitcoin for long enough it's inevitable that you're going to start a podcast inevitable so i'll have you on my podcast next year

Perfect. All right, that's a wrap.