TFTC: A Bitcoin Podcast - #281: Chinese mining theory, bitcoin divisibility, and UTXOs with John Carvalho

Episode Date: November 2, 2021

Join Marty as he sits down with John Carvalho to discuss: - John's Chinese mining theory - Is bitcoin divisible? - The UTXO set - The Lightning Network - Public mining companies - Holding your own keys - much more Follow John on Twitter Shoutout to our sponsors: Cash App Unchained Capital Braiins Compass Mining

What is up, freaks? It's your boy Marty Bent, here to introduce this rip of Tales from the Crypt. Sat down with our good friend John Carballo. We recorded two episodes. We're only going to release the first one now. The second one will be out at a later date. This one, we dove into some uncomfortable truths about Bitcoin, as John likes to describe them. Very good follow-up to the Arbed Out episode that we dropped on Hallow's Eve over the weekend. uh yeah we dive into it all the visibility block space your blocks be bigger should they be smaller lightning uh the utxo set a bunch of things i think you guys are gonna enjoy it it was brought

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got a morning workout and 6 a.m workouts today high cardio my lungs are all fucked up after getting through it getting through it everybody's gonna come in you get long covid no i just worked hard i just worked out very hard probably smoked too many cigarettes last week this was also brought to you by good friends at unchained capital unchained capital is here to help you eliminate single points of failure in your security setup in your key setup for bitcoin uh many single points of failure if you're holding your keys uh if folks you won't need to be holding your keys if you're holding claims to bitcoin on an exchange you don't hold any keys and therefore it's a single point of failure exchange exchange you just wake up one day say nah me you're not

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That's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. John Carvalho, good morning. Good morning, Mr. Bent. What are we good morning today? What's your Chinese mining theory? You want to jump right into that? We're jumping right into it.

All right. It's relevant because I was talking to a couple of Bitcoiners a couple nights ago about how I had had this theory based off of observing China's behavior for the past 10 years. I guess 2014 was really when they got into, you know, making ASICs and such. And, you know, everybody makes the joke like China is like has FUD and they banned Bitcoin a million times. And, you know, there's they're always just kind of trying to cause problems with the Bitcoin price, whatever or whatever it may be. But then this year they like combined this FUD, you know, with a removal of hash power and a, you know, so-called migration of all the mining to the U.S. and so my theory goes like this there are a lot of assumptions here so i could easily be wrong

but i like to think that like if i could come up with this like that china could definitely come up with it and so basically what i think is that there's a portion or time in this in the every bitcoin cycle where china decides to basically price manipulate in order to get more bitcoin and they will you know sell their bitcoin use the collateral to short bitcoin to get the price down and then try to reaccumulate at the bottom or during a bear market to have more Bitcoin in the end. And obviously, the FUD of just banning Bitcoin in obscure ways or harassing Chinese exchanges isn't really working that well anymore. You saw this year, I think, when they did a non-mining related FUD run and moved the price maybe $33,000 or something like this. It didn't

really have much of an effect yeah the marginal return on that those uh quote-unquote crypto banning announcements has has been reduced significantly over the years and i think that they they see this and they became aware of it and they said you know well we have a whole next gen of miners that'll be shipping in the fourth quarter of this year and we're going to be basically having to find an aftermarket for all our old miners to bring the new miners in and you know as as you know like china is also dominant in the production of asic chips for miners not just mining directly um yeah taiwan and south korea sure chips i will i should disclaim before all of this mining is probably the thing that i'm like less expert on than most things in

bitcoin you know so a lot of this is speculation on my part based off of like how i would play the game you know what i mean um and obviously china has been making a lot of bitcoin for a long time you know being involved with asics whether it be the production of the asics or actually implementing them in farms since pools um and so my theory is basically that they decided to like create a demand for the aftermarket to combine with fud so basically say they pulled they turned off miners you know after they sold sold their bitcoin and took their made their shorts and you know it's like obviously this ban is quote unquote real it's like they literally took the miners offline look at the hash rate it's dipped significantly and this is the first time it

dipped significantly since 2014 it's basically been parabolic since then and we've been mostly sideways this year it's like the first time this has actually happened um and so it's like it's you can see it you can believe it and then they my theory is that all they did was they sold a small portion of their miners of basically the miners they would like to get rid of um and and you know again you can probably correct me on some things here where there are some holes in my theory but let me let me finish it through um and you know then as those miners started getting delivered you know you had you know american mining companies eating it up like this is the first year everybody's like talking about all these american mining companies like nobody ever

heard of like two years ago right and now all of a sudden they're all relevant they're all hyped they've all put it they're all putting a lot of hash power online everybody has this narrative where china's china has stupidly you know left mining and given it to the u.s and the u.s is now you know dominant and and you know seizing the day um but as soon as they they had those deliveries start coming online they started putting their own miners back online you know so it looks like all of the like we have no real gauge to know how much truly of their miners they literally sold to the u.s like you could pull maybe all the people that bought some see what the total amount purchased was see if it matches up with the amount of hash rate that fell off

i don't know that anybody's actually done that and i don't know how hard or feasible it is to do that but my theory is basically that they were buying back their bitcoin at 30k and they were turning on the miners slowly you know to try to get back in and they were just simply either not signing blocks or signing blocks differently and you know creating some you know uh interference with your with our ability to measure their behavior like different than the past and now using this as another form of price manipulation and so what i was saying to these bitcoiners at the at the bar the other night is basically that if i'm right what we'll see is that china will unban mining and then we'll start to see mining going back parabolic again when they put start putting next

gen miners online and those next gen miners may not even make it to the u.s they might just all get consumed in asia and that will be like the the you know reviving of chinese mining or asian mining you know in in that area of the world and it will be like they'll make it look like great news because now they have all their bitcoin back and they'll say oh look we're unbinding my unbinding mining pump it you know and they'll distribute again and then we'll have our next real bear market eventually maybe like sometime next year or the year after and so they're just trying to find ways to manipulate the price to be able to get more bitcoin and i'm just what i'm worried about is like there's an there's also been a little resurgence of like pleb mining you know

like you have people just buying two or three miners or something like this and two or three miners are you know very expensive um for most people at least and they're kind of trying to get into mining and my theory and what i was joking with with these guys at the bar who are people you all know and know and love but i won't mention them was that they'll never get the amount of bitcoin back that they spent on those miners as small-time miners and yeah that that covers most of the theory and maybe i left something out but just generally it's it would be a strategy for manipulating the market to get more bitcoin both against traders um to manipulate the trading market price and also now to manipulate buyers of mining in outside countries i like the theory

a couple things i need help getting to find who are they i think i've always famously said you need to separate the ccp from the individual chinese miners and the entrepreneurs running mining companies can you though like as far as i know like big business in china is pretty much the ccp well it depends on how big it gets right i have no idea like i think like that's the hard part is like we stay pretty ignorant and i think they like us to stay pretty ignorant the the information that we get about chinese like anything to do with bitcoin is always like second third hand random twitter accounts and that's how that's at least the impression not being in mining btc king 555 exactly exactly it's like who is this guy and why do we believe every press release he ever

gives us like i just you know i'm a skeptical guy as as as you should be and we all should be in particularly in this regards and that i guess so that is another i don't want to say holes to poke in a theory but some things i can confirm is being close to the mining industry like there definitely have been chinese miners who are running farms in mainland china that have moved to the u.s and spun up sizable operations multi-hundred megawatts so it may not be all the hash rate uh that went off the network earlier this year migrated to the u.s and other countries but there has been a material amount there were rumors that smaller operations in china even after the ban were still operating so that i think that chart that cambridge institute threw out a couple

weeks ago it's just like a zero percent mining in china it's just there's that's complete bullshit there's definitely hash rates still in china there's definitely anecdotal evidence that does not support my theory yeah but the problem is is anecdotal evidence you can only go so far with it like it'll support your narrative just as much as it'll support theirs i can find you know yeah on both sides and in the end somebody would have to make a true research effort to properly measure how much mining did actually come here and whether it does compensate significantly for what we saw as a change i agree and i i'm not i'm not saying your theory is wrong i certainly think can be right um and that's sort of the beauty of the bitcoin network right is we can actually like

never truly know um due to the way mining its permissionless nature works and so a couple more things manufacturing side i just know personally um is to be the mining operations that i'm a part of that uh foreign buyers are getting access to new gen miners and orders so they're at least allowed in the pre-orders of these new gen miners that will be released next year so i don't think all they'll mine with them for a few months first and that's typically what they've done supply chain stuff like i said chips manufactured bitmain taiwan which is a bit of a problem like is that going to be a proxy china state is it already uh to south korea a little bit more risk a little less risky in my opinion i think south korea is more autonomous than taiwan

obviously and then the actual manufacturing of the a6 after the chips are produced they're moving i know for a fact that bitmain and um and micro bt are moving the the actual manufacturing and construction of the asics outside of china's mainland into indonesia uh in thailand i believe and malaysia um so outside of the mainland again still in that southeast asia region um may be risky just to be a proximity to china but i do think uh don't you think that like like i just don't i refuse to believe that china is stupid you know and i think that like they have made a lot of bitcoin you know in the you know since 2014 in this kind of you know industry through you know tsmc i think is one of the major chip makers there like that miners have

like inflated the value of chips you know what i mean and so like to just kind of ditch bitcoin and ditch mining and kind of deflate the value of their whole little you know their piece of the world in this industry it just seems like i just don't believe that they would be that rash and that stupid when they could have just like more formally taken it over instead and just made it and kept those prices up and kept everything producing um and just as a random anecdotal thing what i'll add is uh matt alborg from bit refill he likes to do research on a lot of different bitcoin stuff and stats and stuff like this and he doesn't have time to look into it i tried to get him to but he did find that um and this is again anecdotal and maybe could be debunked but

he did look at like like sites like similar web where you can see web traffic you know for things and he noticed that the similar web web traffic for all of the chinese mining pool websites has not changed at all at any point this year like there was never a dip in in traffic to those websites interesting which like so what i would like to see somebody do is analyze whether there's been an increase in like unsigned blocks and see if that how it correlates to the mining shift in mining difficulty that we've seen this year or see if there's like another shift when you like marked blocks with other names or new names yeah so when you say you're talking about like the coinbase message so you can yeah like the only reason we know any miner doesn't as far

as i if i understand how it works correctly the only reason we know who mines was because they say they mind it and you can never be for sure that right right so it's something manipulatable as well like china could have just stopped signing their blocks and now all of a sudden there's a big shift to anonymous blocks or they could have started signing them as like their non-chinese entities like and they could have been forming this for a year you know where it's i'm getting very conspiracy here but yeah no i mean anything is within the realm of possibility when it comes to china but again i would caution like i just don't i don't think i do think the ccp is smart i don't think they're that smart i don't think they're as coordinated as many people

i don't think i'm that smart though you know what i mean that's the thing it's like if i could come up with this this is what i would done if i was them if i'm if i were willing to lie willing to manipulate like they always have you know ever since they were part of the bitcoin community and i don't want to it's not i don't mean this in a racist way but i mean this in like a strategic way like as as game players in this game they are willing to do things in a certain way and they have they have established that pattern you know and so why wouldn't they do this idea that's just that's what makes it interesting to me at least i'm happy to be wrong you know yeah yeah like yeah it'll be interesting to see how it plays out like again i'm i've always been just knowing

chinese miners and maybe i'm getting psy up but i do think there is a delineation between the mining industry and the ccp maybe that line is getting blurred as bitcoin becomes more more powerful on the global stage if you will and then there's another thing too like maybe it's just a coincidence um i had edward evenson from brains on earlier in the year to to help walk me through the chinese mining ban as as a pool operator they have a lot of chinese clients that they interact with and so he lived in china for an extended period of time as well and i think the coincidental event of the ccp's 100 year anniversary falling on this year and the theme around that being harmony um and just bitcoin and bitcoin mining specifically sucking energy

off certain grids uh led to some unharmonious activity as deemed by the ccp and so it is what from what i understand from what edward described the ccp 100 year anniversary celebrations were something that the the regime there wanted to be flawless and the theme was harmony and you have this unharmonious uh activity in the form of mining and trading uh shit coins and stuff like that happening and i they edward if you go back and listen to that episode said he wouldn't be surprised if they do all this they ban mining uh they have the celebrations then six months later they just quietly allow stuff to come back online well you know i i will disclaim that like the theory is only sexy potentially because of my ignorance about all the situation but i think

that my ignorance is shared among most of us and like the rest is just assumptions and guesses and just different speculation than mine um and the problem is with my theory is that the it will express not much differently than what you just described you know what i mean if i'm right what we will see is the price pump the difficulty pump and china come back hard you know and then all of a sudden it's like oh wow china is like another they're a major player all of a sudden again and this would happen within the next three to six months you know like if i'm right and if you're right yeah so it's like i don't know that we'll ever be able to split the difference but what i hope is that when people listen to this there will be people both in the know that will provide some

information to refute what i'm saying but maybe people also that are intrigued and try to do a little bit more research and actually find out how true i might be how true it might be in this theory you know yeah and as bitcoiners i think we should always simply run with the base case that china is going to be involved in a material way because they have to be if they want to remain a superpower if we truly believe that bitcoin is going to succeed and do what we think it's going to do and that could get into like you know conversations you and i have started to have which are like you know my aversion to public mining companies and like the the potential danger that they pose for at least you know bitcoiners within their jurisdiction yeah so

let's get into this we'll start with the disclaimer that i am uh on the board of directors of a publicly traded mining company and so so this is extra spicy take that uh take that um information as you will as we as we walk through this yeah um so i'm gonna butcher this probably because again mining is not like my specialized area of interest but if you read crypto economics by eric fosco which i believe everybody really should to me in my opinion it is the bitcoin book it is a bitcoin bible it should be a part of your knowledge so please do that agreed um you know one of the one of the kind of uh fallacies i believe is how he he frames everything is like which fallacies there are i don't remember the name of the fallacy but you know he basically gets into how you know it's

a misconception that like that that pooling is a good thing and a safe thing and that people don't think that any sort of centralization of mining would be like terrible for bitcoin and there are some people that think that you know as long as it's under 51 it's okay and and the rest is you know just like offsetting risk you know for all the people in the pool but the issue becomes that the larger a pool becomes within a jurisdiction the easier it becomes to become controlled by the state or influenced by the state and even further you know he does predict out that you know inevitably miners will you know opt to go public and get closer to the cancel on effect essentially you know they'll be able to somehow get money cheaper or get moat in a way you know

that they can protect themselves through the u.s government and their relationship with the u.s government and however the u.s government enforces markets and we're seeing that you know i think we're really seeing that this year like we're seeing like several public mining companies come out of nowhere that they probably i don't know some of them probably existed and nobody cared before but now they're all relevant all of a sudden and if we see you know all of u.s mining go into a state where most of it is public companies now these are public companies that are much more easily influenced by the state they do get their advantages you know from the state by being close to them but they the the risk here is taxes are a way to offset you know inefficient

mining behavior and so if you have incentives that lie outside of bitcoin you have to fund those incentives you have to have somehow like compensate for the fact that you're doing something inefficient where you should just be trying to find the cheapest energy and the highest efficiency asic etc now you you're you're distorting the whole game when you choose external incentives but only a state can really do that for a sustainable amount of time or at least a long it's it's not actually sustainable in the infinite term but it is something that they could sustain for quite a long time because they're the only ones with a monopoly on violence and the ability to basically force people to pay taxes whether they use fiat or not um and so the concern is that u.s mining

for example u.s public mining could be some come so large where censorship becomes actually feasible at least for some time period and it might only affect americans it might only make other people have to pay a little more in fees or you know it wouldn't kill bitcoin by any means but it would certainly make cripple bitcoin for a subset of users at minimum and so this becomes a risk to bitcoin's quality of censorship resistance i don't know that it could i don't really like believe in mining attacks honestly as far as like 51 attacks i think that that as a community will always transcend them somehow either through code or just social behavior um so that's not really my area of interest so much as that like they could pull off forms of censorship for quite a long time

they could like make americans required to only use kyc bitcoins or use kyc accounts to have to submit transactions directly to miners they could try to enforce a lot of like annoying things that would like basically chill people from any sort of like black market behavior with bitcoin hmm agree they can certainly try whether or not they'll be successful in doing that it's another question right like people will just well use other means use other pools you don't have to you don't have to stop everyone to make something illegal and then and you don't have to arrest everyone to get everybody to stop doing something illegal but at the end agreed but at the end of the day those most harmed by that regulation are the publicly traded miners not

i would argue not individual bitcoin users right so i'm more thinking of a state where like not right now you know it would be like it would be a form of like deterioration where the miners got to be bigger and bigger and like all public and then closer and closer to the state to where they pretty much became the state you know they become dependent fully dependent on the state this might take five ten years to see like like uh problems exhibit themselves but it is like a predicted path it is something that like Eric Voskuhl and many others have predicted as a potential attack vector for at least the censorship resistant aspect. Agreed.

Potential attack could get there again. I'm a strong believer in Bitcoin's natural incentives. Like if it does get, well, this is just fun to talk about. I know. I know. It's a lot of fun to talk about.

And it's something as a director on a publicly traded Bitcoin mining company board, I should be thinking through these, these risk analysis as thoroughly as possible. I apologize for calling you a status. it was late at night i had thick skin john as do you i think we can i try to it was insulting though i was like oh oh i was clutching my pearls the uh yeah but like so like if it does get to that point right like again would it just render those pools unprofitable and therefore the miners

pointing at those pools less profitable than the market outside them so i guess you just need a sufficient amount of hash rate outside of public markets as be that sort of the curbing function or they would have to actually be supplementing their behavior with taxes like you know directly or pretty much directly you know as long as they yeah for example subsidies or just you know uh actually getting like funding or like tax cuts like there are there are several ways that they could get these benefits yeah and now you have acceleration of smarty coming out like i don't know how long they can play that game anymore dude i think the emperor is naked as naked as he's ever been more and more people are beginning to realize it and again a strong theme on this

podcast over the last six months particularly is highlighting the the return to states rights and autonomous sovereign states that are beginning to exerting their rights obviously we're in texas i moved here because i saw that texas was one of those states standing up for itself against the federal government and sort of putting a stake in the ground saying hey we're we're we're good we're not going to go along with that florida's another you have north dakota south dakota tennessee a bunch of others i think that trend's only going to get stronger we actually saw three counties in western maryland last week come out and asked to secede to west virginia because they don't agree with what's going on at that particular state not even for the federal

government just from their own state and so yeah i'm not a religious person but god bless all those people like i lived in florida for a long time i didn't really like living where i lived in florida and i wanted to get out but i feel like very very thankful for like their behavior and texas behavior and the other areas you're mentioning like they're saving the country right now right it's it's a beautiful thing to say i'm very again thank god for that it's extremely encouraging and so i guess like again these future attacks is like how strong is the stake on it being i maybe i think this is very contrarian in the bitcoin space particularly like i think the stakes get the state as an entity especially the federal government here in the u.s and federal governments

around the world not that they're all federal government whatever the state apparatus of the day is in any particular country is getting weaker and weaker like i think we're going to see the sovereign individual thesis play out pretty aggressively the state will try to get violent but i think that'll only be temporarily um again i don't you can't have dementia joe up there like gripping like imaginary ski poles and have the whole country have confidence in the state of our federal government for for much longer when you add things like inflation the energy supply crunch that's going on uh they're being exposed as incompetent at the particular scale that we're at in the united states specifically right now well i think that humans are like really really

amazing creatures and that that goes both for like overcoming adversity but also causing it and like hyper bitcoinization and circular economy and more specifically the acceleration of these things is like a very very important topic for me um we'll get into it more when we talk about the new company but um it's something i really like to focus on and i i don't believe like in just letting bitcoin do what it's going to do um because i think that like actually trying to accelerate bitcoin you know adoption not adoption in the sense of like evangelizing it but like continue like really like modeling the future how we would like it to be technologically and making sure we like have the right tools everybody needs and you know the right infrastructure

to actually enable these things to happen faster and safely um i think that's really important but at the same time i think that like i mentioned like we're really amazing creatures for creating adversity as well and i think that like i do believe that that hyper bitcoinization will like have a parabolic aspect to it or like basically a curve where it increases in intensity the same way that you know inflation probably will hyperinflation will probably be biggest part of that don't say the word john yeah you can't say it i might cause it by mistake no i want it to happen i think it's inevitable and i do think it will happen on a curve and um the question is how in how ingenious is the government willing to be in the face of this adversity as they see

it coming from bitcoin and what kind of like really shitty cruel things will they try to do and i think right now they just don't they don't feel the pain too much and they don't see it too much but we're already seeing a lot of hints of like you know what janet yellen's willing to say what people are willing to say how insane is that that she actually came out and said like you're talking you're referring to uh unrealized cap gains yeah yeah yeah and so like i imagine getting every bitcoiner chased by the government to like tell them how much bitcoin you have and how much unrise gains you have and this is like a horror scenario especially if they start actually using violence to enforce it um so we don't know what they're actually willing to do i think they're

going to be willing to do some things we think they won't be that doesn't mean they'll fail at them but there will be pain you know and we will have to overcome adversity we'll have to actually be holding our own keys actually be using our own nodes like there'll be a point where like and it will be too late after it starts like there'll be a point where like you'll have to have actually cared about these things agreed we'll have to spin up fucking mesh nets we need we need to start spinning up mesh nets freaks get on it uh it's an area i have a lot of interest in that i haven't like started researching yet but i would say maybe like in you know the next year or two i would like to get involved in that realm i just have so much i'm doing right now but i you'll definitely see

me in the future taking part in that because i do think it's important part of the design i do as well and yeah maybe i'm too much of an eternal optimist but like again again it goes back to like the perfect game theory like the state the state oversteps its boundaries starts enacting violence against bitcoiners again hand shown you've you've misstepped actually by doing that by delegitimizing yourself and legitimizing bitcoin in the same way like yeah yeah i think you can make a constitutional argument not that anybody cares about the constitution anymore but bitcoin is at the end of the day a property rights and free speech issue that should be respected and then you can even get into it like and nobody's really talking about us i'm happy

that the ibex mercado guys actually brought it up during our discussion last week but like el salvador's move to make it legal tender actually has implications in the international trade realm like if you were going to respect the international trade treaties that have been signed over the last few decades like you one of the uh one of the rules in some of these treaties is that if a nation has a currency that they deem as legal tender you have to recognize it as the counterpart in trade, as legal tenders. If you're, I believe, if you're simply, I don't even think you have to be doing direct trade with El Salvador.

I think you just have to be a part of some of the same treaties that have been signed to recognize that rule. So the arguments and the strength of the arguments that the state has are very weak. The question is just pure brute force and strength via the violence that the state has monopoly on today. Begin to leverage that to go full totalitarian, authoritarian, excuse me, and start attacking individual Bitcoiners and the network itself, which is yet another reason why I moved to Texas. Because if that does happen, like I am thinking about this, the move here is evidence that I have thought this stuff to be a possibility in the future and feel like being here is probably wiser than being in the northeast part of the country.

well it's a big reason i left the u.s or at least felt comfortable with leaving the u.s you know five years ago when i moved to romania like i just uh i didn't feel like this was the place for me i felt like the trend and the trends and culture and the trends and politics were like so far from who i am as a person i was just like seeing how things were during the trump election i was like this is just not my place like i don't belong here i don't want to vote for any of these people and i felt the same way with the most recent election and yeah i just feel like things are going awry and i also don't like the current trend of within bitcoin culture of um courting politicians um you know this is maybe a little edgy me sitting in austin because this is kind of the heart of

this of that culture um you know people courting ted cruz and we have cynthia lummis and we have you know jokes about you know uh parker lewis becoming mayor which they trolled me on that i thought that was real um and then you know inviting you know i think it was the actual mayor to bit the to bit devs to talk and you know he's injecting his ideas to the crowd and some of those ideas are not totally compatible with bitcoiners and things get a little awkward and i just you know i i made a tweet at some point saying like you know we'll people courting the politicians will regret it like the people like asking for clearer regulations trying to educate regulators like i just think that we're just enabling them to like later you know take what they want from bitcoin and you

know restrict bitcoin and learn how to restrict bitcoin and i think that like we just don't need them maybe i'm wrong maybe we will need some allies but if the plan is like you know to destroy the banks and not need the government and and manage ourselves and you know self-regulate in some way like we have to recognize that you know the way the government reason the government behaves the way they behave is because nothing really truly scales on a global level like pretty much nothing and so they can't scale collecting taxes they can't scale like auditing everybody with the irs but what scales is just printing more money you know that's easy and so i think that that's why they're kind of like reverting to these crude tactics because they can't actually

scale any form of enforcement but that does require us to have an alternative like how are we going to scale enforcement how are we going to like deal with people you know yeah and this is a an issue i've gone back and forth on quite a bit just in the last few years like i've always strongly leaned towards the description you just laid out like don't engage in politics it's not worth it all politicians are bad you're only going to corrupt the system they're just going to use you to

get what they want at the end of the day then it's hard do you support Cynthia Lemus of the world who gets it and is in Congress on Capitol Hill fighting for Bitcoin and Warren Davidson if Ted Cruz does actually get it

is not using it for his political brownie points which I find hard to believe I mean everything is for political brownie points with politicians like even with Cynthia Lum is like I don't know her that well I'm speaking a little ignorantly but just in general the the outsider impression because I want to stay an outsider on this stuff is just that she found a pet issue that can get her some some listening some ears and some supporters and she's trying to ride it through you know and and the way politicians are most likely is if she finds a better pet issue she'll pivot to that one you

know and that's how politics works is you have to horse trade and so she sees a horse here and she's trying to figure out how to trade on it yeah cynthia specifically like again she's the one particularly having talked with her maybe i'm being corrupted or co-opted whatever you want to say just by even by even like engaging but i think she's pure in the sense that like she ran the treasury at the state of wyoming and realized like that the pension the state pension specifically was only allowed to invest in shit like muni bonds and government bonds and stuff like that and she is very passionate about actually getting people exposure to better investments and sounder investments particularly some money um her experience running the treasury

in wyoming uh and and seeing the state of runaway debt here at the federal level um i think she's pretty sure she's pure well if you're gonna have a pet issue bitcoin is gonna be one that will hold up against the test of time like she's never going to be like insulted or made to look dumb because she tried to fight for bitcoin even if it was just for a superficial reason you know and again i will disclaim that like i'm intentionally trying to stay a bit ignorant about this stuff so my my theories might not be so you know on point you know yeah no that's like again again i've gone back and forth on this particular issue many times over the last years because like all right i agree like we can just build this shit in parallel we don't need them we don't need

permissions the beauty of bitcoins open source is permissionless the state um getting involved is completely unnecessary and arguably i don't even think it's arguable i think it's just obvious we'll do some harm to to the network but then again it's like all right like they're gonna fuck it up anyway like do we do we play the game to have them fuck it up slower like that i'm a little more worried about shit coin lobbyists and like you know trying to get crypto web 3.0 is the green is the green uh they're gonna fucking a16z hired a fucking world economic forum stooge to to go to capitol hill and i'm much more worried about that kind of stuff yeah because they're basically going to find ways to justify their investments looking

like the proper choice you know the safe choice the green choice whatever it may be and they're going to equivocate and basically end up creating more regulations that will allow coins to get closer to the state tit and they'll position bitcoin as the bad guy like i think we're going to have a meme like i'm predicting there's going to be a meme from governments it's just blame it on bitcoin and like it'll just be blame it on bitcoin blame it on bitcoin hyperinflation blame it on bitcoin stock crash blame it on bitcoin you know coin crash rug pulls blame it on bitcoin like real estate devalued blame it on bitcoin and we'll have to we're gonna have to like live through that and fight through that and like deal with all the fud you know of all the normies

thinking we're the worst people we're the most black market people and here we are we're going to be toxic i'm going to be saying yes it is black market money that's exactly the point so what like people think people don't like to use words literally but they do literally mean things and black market does not mean illegal it just means outside of the existing regulatory market it just means not that market um and it doesn't mean bad it just means free yeah it means free like drugs weed was a black market now it's somewhat gray i would argue it's still not legal at the federal level but obviously it's been uh legalized in many states across the country and yeah like yeah and like yeah the arbitrary nature of state regulations uh forced bitcoin

into existence not only state regulations but central bank policy as well that's the beauty of bitcoin really you have the network asset aspect that really gets around um arbitrary state regulations and you have the sound asset um monetary good that really competes with central bank runaway fiat because bosco has actually an interesting term he he calls government money government fiat and he calls bitcoin market fiat so it's like fiat issued it's still a fiat but it's issued by us together and enforced by us instead of issued by the government because i don't like bosco's definition of fiat though yeah yeah when i think of the book i'm still i'm like maybe a third way through it so when i think of fiat i think like i define fiat as money

that is decreed we were literally forced to use it by law and that's what we have today the u.s dollar you're forced to pay your taxes in the u.s dollar um where bitcoin seems to be more of a free market phenomenon nobody's being forced to use it they're coalescing on the network yes it was fiat i guess you could say it was decreed by satoshi that this is how this network will work um and here are the consensus rules but i don't think there is a i think a fiat i think i think of governments leveraging violence the point the yeah the violence part is the problem um that there there's a little weakness in the usage there but i like the usage because i like the concept of just thinking as all money as something that is like issued cooperatively um and how what and how

cooperative it is is how good the money is because it helps i think it will help people rationalize things like like like tether and and gift cards and like basically you know any token issued on your reputation is like another kind of fiat you know it's like i don't know maybe that is a better merchant fiat as a word but like just the idea that like there are always going to there's always going to be a need for people to be able to like have credit in some form like you can't really speculate on business growth without some sort of abstract concept of loaning or credit and it And if you don't have violence as enforcement, then you need to have some sort of reputation as enforcement. And so, like, it's very interesting to me to think of, like, all monies as, like, these consensus agreements we have.

And the government fiat money is supposed to be one that's formed through democratic means. You know, like, we're all supposed to actually decide how it works. We don't in practice because it's not even part of the government. It's the Fed. It's like, you know, there's this whole weird relationship. and now they're they're printing it without involving us so it's it's corrupted but that's the the design is not like the intent of the design was not bad intentioned and so that in the end all fiat is that way it's it requires consensus of people to agree to trust the design

yeah well it is bad intention i would argue and we did agree on what money should be before 1913 it was written into the constitution you should have no money outside of gold or silver the design is very corruptible it's it's a it's the best design we had maybe for a long time but it was corrupted pretty quickly very quickly and there's another semantics argument yeah like issued it's not people don't agree that bitcoin is the best money and then issue it and bitcoin's being issued uh just because satoshi launched a protocol and people are putting computing power and making transactions uh it's not like yeah it's more referred to as emission than issuance yeah yeah it still is created and it's created cooperatively and it's created under a rule set

it's just that our rule set is actually enforceable it's enforceable and without violence and people without violence and another thing like again it's the the natural market force to coalescing around bitcoin and deciding or not deciding agreeing again to get very semantic here like people bitcoin isn't the best money because many people are using it and agreeing to use it bitcoin is the best money because of the properties right and scarce digital uh portable divisible fungible all that stuff um and they're coalescing around bitcoin not because it's been decreed or issued that's the best money they're agreeing that these properties make it the best money most distributed most likely to succeed in the long run so i don't

know if it was intentional but you just threw me a really good alley-oop where you mentioned divisible divisibility and we talked about maybe talking about uh today about the good morning tweets i don't know if you followed those or saw all of them but i did like 30 days in a row every morning i woke up at 7 a.m and came up with like a new little misconception about how bitcoin works that some people have and the trick of it was they were all for the most part just literal truths that people didn't realize were literal truths and people wanted to like argue about these details and i was there i would stay there for at least an hour or two there to argue with people to like you know sort of like a socratic method a lot of people didn't quite get it at first for maybe the

first two weeks i had a lot of people unfollowing me and blocking me and telling me i was a shit coiner and telling me i wanted to fork bitcoin and all these crazy things but the people that stuck around like we're really appreciating it and like i walk around austin and people are just like oh thank you for those things and i i did have to stop because it actually became stressful um to argue with people every morning and start my day that way was kind of getting in you know getting into my head getting into like my stress level and i just couldn't do it i had to stop and it was starting to get hard to come up with a new one every day but they were too um go ahead sorry it's gonna say starting your day with an internet fight is never never fun sometimes if

you're you're bashing somebody over the head it is fun but uh yeah i mean all my tweets have been quote unquote good morning tweets you know for years it's just that some for some reason this format like stuck with people and got them to kind of congregate over the the schedule ever or something i don't know it worked a lot better this way um but kind of two of the themes of them which are related um and related to divisibility um are actually three i would say one that you might find interesting or the listeners might find interesting is just the concept that i believe that all forms of scaling are forms of debasement and that this is an important way to view bitcoin you know proposed bitcoin changes because it should be like the first question people ask about

like what how much are we speculating on this scaling form and who are we debasing and by how much by adding the scaling method and we can talk about that specifically but that also like kind of forks into that bitcoin is not divisible and the other kind of interesting one that kind of triggered a lot of people about how um multiplying bitcoin and dividing bitcoin are the same thing and i don't know if you want me to elaborate but yeah we can get into it me and ryan gentry had a pretty thorough conversation about all this last tuesday night so we're about almost a week away now and yeah like uh ryan i on the side continue the conversation like i understand we're going with a lot of this but i think i do disagree with some of it particularly the debasement thing like

i think you're again getting semantic well it's more of a dynamic to be aware of like it doesn't mean that people will literally lose value every single time that you scale bitcoin it means that if you choose to scale bitcoin in certain ways um and that scale isn't realized that you end up with debasement okay let's get into it because i would just simply describe it as a trade-off that's made right that's what i mean by dynamic is there is a trade-off there yeah yeah um and i don't think it necessarily leads to debasement i mean well again that's okay so it's semantic but it's by semantic i mean that it's literal like so like for example um lightning network you know adding the lightning network actually moves transactions away from miners and to the

second layer and so the fees are now realized by nodes that do the routing and now these are ideally additional transactions right so you ideally what you want to see is the blocks full with lightning channel creation and lightning channel management and then any of the extra transactions being offloaded but it's not what we're seeing yet so like you could argue that if the block size say had stayed one megabyte that you know the miners would be still getting the same kind of fee uh potential that they had and thus that their mining machines and their investments in mining were protected in this way they didn't lose basically that i hate to say this because this is udy's thing but they didn't lose like their digital real estate within bitcoin but

i mean in a much more abstract way than maybe udy does i mean just any like amount of skin in the bitcoin game is like sort of like your little piece of bitcoin and when you scale bitcoin you basically like dilute that piece in some way and which is can ideally be a good thing every time you just say okay we we made transactions more efficient so now we have more transactions we made uh we scaled some way to have more users so now we have more users and more transactions and so the the but the the dynamic here is that it's always speculation you don't know for sure if your scaling method will be fully saturated and if it isn't fully saturated then you do have debasement basically what you have is the existing users just get to do something more cheaply

and so somebody isn't getting the same amount of pay that they used to or they're having to do more overhead and running a node for having bigger blocks or you know which would be fine if there were more people and more scale and my bitcoin were worth more but again if you don't saturate the potential of that scale you do have some form of debasement yeah and i guess whether or not there has been material or I don't want to say material, but the basement at all, I think it's too early to tell like the saturation you just mentioned. Like,

I think we're so fucking early with all this. Like you can't even know that saturation materializes. I don't think until like a decade from now, like two decades from now, like if this is a multi of saturation would change depending on the scaling method we're talking about, you know, like for me,

I think that the lightning one is easy because you could just say, okay, the block, if the blocks are full, then lightning is paying off right at least on a transaction level on a user level it doesn't really we didn't add any scaling you know with lightning we just added transaction scaling but if we do end up with literally more transactions because of lightning in full blocks then everything worked now how long that will take i don't know maybe we'll keep making other scaling methods on

the side then just like the blocks just never fill again you know and then the miners are always having to like they're gonna have to get into lightning routing and they're gonna have to like get involved in other ways you know yeah no chris stewart and i uh had a recording on saturday morning and he he like was opining on uh luke dasher getting shit on like during the fork war saying that we should make smaller blocks he was like dude what if luke was right i was like maybe me and one other person that supported him and that i mean i think that like he wanted them to be like 300 kilobytes or something i think that's a little extreme i would have just liked to have seen you know it'd be a separate conversation this is one thing i don't like about like the

soft fork culture that's developing in core is that like we're kind of combining more than one thing sometimes i would have liked to have seen segwit to fix malleability i would have liked to have seen and to make lightning more feasible and not have to have made this weird compromise of adding like the weight yeah which is a little hard to understand a little like so does that mean we can adjust the block weight again later and like like this assumption that bitcoiners have any capability to audit bitcoin core or even understand or even have enough friends that they trust that do know what's going on to even like learn it's just it's a it's insane it's absurd like like changing bitcoin should be the scariest thing and the hardest thing to do it should take

like years and years to get things through even taproot right now like it's universally or not universally it's generally understood to be like a safe no-brainer i don't know i don't i can't audit that code i can't audit that cryptography i don't know if somebody missed something but furthermore it doesn't even have 50 like support yet like on the on the actual network and but it's already going to be activated you know and so the next couple weeks these things are these things are tricky you know i don't want to like dissuade people from improving bitcoin but i do want them to like fully realize the weight of what they're doing like they're just get asking the whole entire bitcoin community to trust them yeah and these decisions will impact again if bitcoin

is to be successful and as successful as we envision it being and generations that come after us for for hundreds of years potentially and making these decisions today and i agree and that's that's one thing again that we talked about last week is you think people should be much more skeptical of developers and um changes to bitcoin like i saw that um eric bosco was is trying to get um to raise money to get like more formal funding for the libitcoin project and we had a little bit of a debate uh mostly him and with uh some core devs and adam back and some people like like on twitter about it and i really liked the result i started to get involved in the debate a little bit and i really liked the conversation because like even i was like learning as i like was

defending it i was saying you know it really would be cool because it would be so much harder to change bitcoin if you knew that like there were like these libitcoin holdouts that had like 20 of the network or something that just always wanted bitcoin to be the same yeah and i i like the idea of it like having to also convince them you know and i think that proved advantageous during the 2019 cve bug i don't think libitcoin was affected the same way that core was i don't remember but i i i think you might be right about some of those things i think even eric pointed that out that it wasn't a flaw in their setup and another thing cool about it is like there's a lot of um like i forget the word like technical debt or such in in bitcoin core there's a lot of like

design stuff that's kind of just stuck that way that that nobody would ever choose to make that way today if they were designing from scratch and so to have another implementation that was like all based on say performance or optimized for like server usage within a platform like bitcoin core doesn't have these things like it's like multi-core capability is shit and like it's it's like management of resources there's nowhere near what it could be if it were designed for that purpose and even i had to experience this when i was like running exotica like when i was like having my back-end dev explain to me like all the resources that bitcoin actually needs and uses when you're integrating it with an application it's not just like downloading the blockchain

and keeping a copy it's like constantly accessing that data and using it within your own database and within your own platform, it's a whole different monster. Yeah, it's not trivial, freaks. It's something that should be thoroughly thought through as well. I do like the Libitcoin implementation hedge, personally. It's very controversial. Should multiple implementations exist? I think we see that being beneficial for Lightning.

and again with the cve bug in 2019 i think that proved beneficial as well um as a fail safe and then the steel man i'll say what they'll argue is we've seen evidence of it being bad in the ethereum space but it's like i don't know ethereum is like a simulation all around and i don't like to like use it as an example for too many things because it's like first of all you have to have the assumption of ethereum to talk about the whole premise and like the assumption of ethereum is just bad you know it just it doesn't scale it's overly complex there's so many ways that like it's just wrong that like i don't want to use that as like an example of why we shouldn't do something because something happened on ethereum and then when you get into the details of what

went wrong with ethereum like it's mostly just bad smart contract programming like like and it's mostly the same company with uh what was it parody yeah and so it's like you know these guys may even be like you know having a bad intention or you know who knows what's going on there but i don't know i just think when you have something like libitcoin that's just trying to like be simple efficient unchanging like it's a little bit different than like experimental smart contracts a new like a proprietary or or custom multi-sig contract that parody fucked up yeah and the founder of parody gavin wood i believe started a shitcoin called polka dot or something like that Yeah, yeah, so they left Ethereum anyway, you know, like.

Yeah, yeah, no, again, fan of multiple implementations. We should be skeptical, of course. That's like, it's a balance, right? You should be skeptical of them, and then you should also respect that, the reviewing and. I do try to stay out of it.

I do try to leave them alone. I don't want to troll them. I don't want to distract them. I don't want to be part of Twitter drama. I do try, but what I have found, though, is like when I do try to interface with them, it doesn't really go very well. You know, like, I've had a couple instances, like, when I was just trying to, like, contribute to updating a tooltip, like, in the wallet, and it became, like, I almost got banned because, like, I wouldn't, I didn't want to, like, bike shed with them about whether blockchain had a space in it.

Like, just, like, it's not really that, like, my experience being a non-core dev, being somebody who doesn't have all the culture of contributing to FOSS, like, it wasn't easy for me to get in. and then there was another similar event i think like there's more people than me um where it was like john newberry and a couple other people were talking about banning people because we weren't supporting this whole like effort to like remove the word black and master like from stuff like and that became a whole thing and we could probably talk about brink and the risk of brink that's another one what do you think the risk is disclaimer i uh really like michael and john um i do not we don't agree 100 well i don't know i don't really know michael but i'm not a fan of john i didn't really seeing his behavior during what i just mentioned would make me scream extremely

skeptical and like watching that kind of thing and now seeing so the concern with brink is basically centralization of resources like they're trying to make it convenient for corporations like i i'm speaking a little bit ignorant ignorantly here i didn't like a lot of research but i do have a lot of experience with nonprofits actually um before bitcoin it was like a specialty of mine like we did marketing services and branding services and we specialize in nonprofits i met with boards all the time i was on boards of nonprofits it's something i have experience with and uh with brink i see what they're trying to do i think which is they're just trying to make it easy for corporations to not have to think too hard about where to put their money deal with the

logistics of like funding different miscellaneous developers and different miscellaneous like like uh organizations like square crypto and all these different things like how do you navigate this landscape well you just go to brink and we'll take care of it for you and the problem with this is that you know brink is already supporting some things that i don't really think should be supported you know they're okay with stacks for example which i think is just total bullshit um it's like this bitcoin adjacent kind of affinity i won't say the word uh and pivoted Many times in the past. Yeah, yeah.

And I find Muneeb to be very disingenuous and often equivocating. And he's okay with portraying things and leaving things out selectively to, like, you know, continue to get his followers to believe in it. But I just don't like the idea of centralizing investment in Bitcoin. And I think it exacerbates the problem of, like, only Core getting the investment because he's Core and he's from that world. And he's probably somebody that would like dissuade these people from something like Libitcoin. And so this makes, you know, it centralizes a resource related to Bitcoin. And so since I don't agree with his perspectives on Bitcoin and development, I don't know why, how this could be a good thing. You know, I would rather see companies be more educated and more thoughtful about who they invest with instead of outsourcing that trust.

I agree. I agree. Don't outsource your trust. yeah it's it's tough again like i personally like john and michael uh i do not i completely agree with you i did not like the blacklisting thing at all i don't think that type of political wokeness should be brought into bitcoin core at all in any way shape or form it's distracting it's bullshit it was never racist they made it racist yeah exactly um but i think you can agree to disagree and still respect people um what do you think what do you think about the uh the diversity of of that type of uh dev investing model or dev support model like what kind of diversity do you mean square crypto brink matt starting open sats with the bends or with ben

one of the bends um the ability to support devs directly on github uh chain code uh nidig i believe is beginning to support people i think i mean when you put it that way i will i'll have to concede that things feel a lot better than they ever have been like we have a lot more options but they are still all centralized around core um they probably do mostly go to the similar set of developers um and there are still outcasts like nobody's nobody's funding luke dasher nobody's you know funding eric voskul like there are people that i i considered like some of them to be like as far as like code wise these are my idols and nobody gives a fuck you know what i mean like i mean maybe i would probably place gmax higher but like he's kind of like opted out a bit nobody's

supporting luke dash right now as far as i know no i'm getting vitmix research grants he has gotten some grants and i have donated a little bit to him at times not that that's significant but like um there are people that care um just not people that have the resources like they have for, you know, just giving him a full-time grant so he can work on whatever he wants, you know? Yeah, I can't believe he got kicked off Twitter. I can't believe it. Yeah, I can't believe it.

I can't believe it both because of how Twitter is these days and because, you know, like there are some topics where people would consider Luke to be a bit edgy. Yeah, but he said if anybody comes and tries to force vaccinate me or my family, they will be met with violence or something like that. Yeah, well, I mean, I guess they probably classify that as a violent threat or something like this,

you have to be real careful on Twitter with talking about just mentioning guns, mentioning violence, um, Twitter. Oh, I can't stand it. But like every time now I try to say like,

enjoy, I have like my own meme. I like to say, which is like when, when shit coiners, I'm just done with them. I enjoy your shit coin. Like,

and every time I tweet that now, Twitter tells me, are you sure? We're trying to, you know, get people to think about the tweets, this, whatever that message is.

It's like, fuck you. I'm sure. Leave me alone. All right. send tweet all right we know that you're sure we're going to hide this in the replies you're going to have to somebody's going to click to come see it it'll be in the chronological feed maybe and it definitely won't be in the curated feed fuck you like that's and i noticed that like

more and more twitter does this with certain things like um if you put a ut i don't know what the i guess they just don't want to compete with google but if you put a youtube link in your tweet it will not go into the curated feed like really no matter what youtube link you put it will never get as many likes or engagement as your other tweets they're trying to get like native twitter video engagement over youtube or something i don't know they just don't want people to leave the site or they don't want maybe they have to pay google when they play it on site i don't know what the relationship is but there's something there that they don't really like yeah interesting um divisibility that's next on the list so i got a lot of shit for this one because people thought

i was trying to be like francis coppola pizza theory and it doesn't really have anything to do with that it's almost kind of the opposite but it is related and so the way it goes is i did these two polls i did one that was um would you be willing to multiply the supply of bitcoin like proportionally like everybody would have the same amount of bitcoin times 10 or whatever in order to make bitcoin more accessible and affordable for more users and that was like 98 percent no um and then i made another poll that was would you be willing to divide bitcoin to add more decimal places and i didn't add any narrative i think i think it just said that alone and that was like uh 38 yes or something like this but a big difference but the trick of it

was is that if you understand how bitcoin works you know that that's actually the same question bitcoin is not actually divisible you can't add more decimal places there are no decimal places in bitcoin the the the bitcoin decimal place is just an aesthetic illusion that is kind of like baggage that we have with like with bitcoin to have to explain this to people go ahead there are 21 quadrillion set to issues 2.1 quadrillion 2.1 so like there literally is only base units in bitcoin it only sees integers and so to add more integers is just simply to multiply like you can put you can drop a decimal place you can put two decimal places if you want you can do anything you want with dots and bitcoin doesn't care because it accurate it does act as a whole

and if you split that whole you are creating if you try to divide it you're just ultimately multiplying it this is a really tricky concept for people to understand because you you have some very very reputable reputable bitcoiners saying no it would be easy bitcoin is infinitely divisible it's actually not you literally cannot do this you can verify this if you actually grill some core developers as to how it actually works and what it would actually look like to add decimal places you will find that it looks no different that there is basically you have two options you could multiply the supply of bitcoin and then arbitrarily place a decimal point somewhere and just hope that that doesn't change anything in a bad way and we can talk about how

that's impossible um or you can basically create a synthetic second asset in bitcoin and emulate what it might look like to have, you know, decimal places. Sort of like milisats in the Lightning Network. But the problem is that milisats is entirely trusted. There's no enforcement whatsoever. I don't support it as a concept, generally speaking. Why not? I like milisats. I don't support things, in our applications at least,

that I can't properly communicate the risks to the user. And I don't think that it's very easy to properly communicate the risk of milisats to a user. What are the risks of milisats? they're just literally imaginary. It's just a tracking system that is supported by Lightning Nodes for what I owe you. But there's no enforcement at all.

It's just an idea. And if that node disappears or they choose to not cooperate, that's it. Your 999 millisats are just gone. There's nothing that lets you show that they enforced your ownership of those sats. Was that a problem of millisats or the Lightning Network and its implementation. It's a problem in Millisat specifically, but it does extend to a problem of the Lightning Network

a lot of people also aren't aware of. But transactions under the dust limit are the same way. If you try to send like five sats to someone, it actually works the same way as Millisats do. It's totally trusted. You cannot like enforce your ownership of five Millisats. So what's going on here? I'm getting like 93 sats payments on Spinks.

So if those are all not accumulating into one transaction, that is over the dust limit. And I may be getting the details wrong here. This is Fiat Jeff's discovery, actually. Fiat Jeff's a really cool lightning hacker. All of you should follow him. All of you should check out his work. I've been following him for several years, and he's only getting better and better. A really young guy.

Shining star. I'm sure we'll see a lot from him. But he figured out that very much like Millisats, there is a very trusted aspect to the way lightning works with very small payments. um i'm pretty sure it's related to the dust limit there might be some other factor that contributes to this but basically it's like the same way you have no way to enforce that transaction because it's either under this dust limit or the way that lightning handles it just doesn't actually give you full rights like it would a bitcoin with that you hold the utxo key for um so millisat's like it's literally just a line item on somebody's node database where you know when you use when

When you transact with them, they try to behave as if they owe that to you. But it's just an IOU. It's just a number in a database. It's nothing to do with the chain. Your key can't prove that they owe it to you. It's just absolutely, wholly, totally trusted credit. You would have to do the same thing on chain in a much more kind of complex or risky way, most likely, to emulate something like Millisats. You'd basically have to do something like create a new segwit block that only supported this asset.

You'd also have to make sure that the asset wasn't able to be created UTXOs because as soon as you do that, it's just more Bitcoin. It's just more sats. And so it'd have to have a separate tradeoff and separate rule set just so you could emulate a decimal place. And even that would still be adding literally it would in the end be effectively adding another asset to Bitcoin. you'd have bitcoin and then this other asset smaller denominated bitcoin well it wouldn't be it just you can't say smaller denominated it would just literally be another asset another token of some kind that had different rules than bitcoin and those rules would have to be worse than the bitcoin rules in order to make it actually subordinate because it could even be better

in a way and those could be worth more than bitcoin if they had certain qualities that bitcoin didn't have but in the end it would be very very difficult to even emulate it nobody actually has a design or a best design or pervert design for how to emulate the visibility on chain like it doesn't it's just not a solved problem um and furthermore you like the only actual solution is to multiply the amount of bitcoin and this also gets into like the that we can only fit like 80 to 100 million people on bitcoin and another scaling issue related to the the quantity of Bitcoin that exists. Yeah.

And this is, uh, one thing before we go to that, because there's another topic that, uh, you're me, you and Ryan were discussing last week. Um,

again, have pushbacks on. Millisats pushed up essentially credit. Could it be a worthwhile trade off? Like, yes, there's risk involved. Um,

I think that, so I do believe that trust is something that people should leverage. like like the don't trust verify thing in bitcoin is cool but like that doesn't mean that trust isn't useful like trust is extremely convenient and if you have people you can trust you can get a lot done like you can cooperate um so i'm not saying that i mean in the case of millisites i do kind of think they're a little bit useless but like just i'm not saying something like that would be useless necessarily or even a subordinate asset a subordinate asset in bitcoin to emulate you know to emulate decimal places there could be real utility there even if there's trade-offs

um i'm just saying that that's how we have to look at it we have to understand that we're trading trusts to get convenience yes um again everything's a spectrum everything comes with trade-offs so you have to understand those trade-offs and weigh the pros and cons and then as an individual user try to make a decision that you think is in your best interest all right Right. UTXO set. It's pretty well known. There's never going to be enough UTXOs for every human on earth. Right. So, so be semantic because a lot of people use this argument against me. You can technically have infinite UTXOs. The limitation is that how many UTXOs can you have with Bitcoin in them? And that ultimately determines the cap on how many users we can

have holding their own keys on Bitcoin. Um, there are some solutions people are proposing to kind of abstract the accounts from the UTXOs and basically try to have multi-users. There are some with Lightning as well to try to have multi-party channels. Greg Maxwell's working on this, right? I only recently learned that there were people working on that aspect on-chain.

I already knew that people were working on things like this for Lightning, but I'm going to guess that they will all have trade-offs. With Lightning, with the multi-party channels and things like this, they're promoted as like like actual solutions with like we're going to be able to do this we're going to have a bunch of people in one channel yes but there's going to be all kinds of trade-offs it creates like weird games inside for like what happens when one person wants to leave what

happens when one person is non-cooperative what happens when two people collude like it becomes a game and so it's not just as simple as now we have more users per channel scale you know thank you jesus it's like there's like there are trade-offs and that's the thing about with scale and this is why earlier i was talking about like the debasement aspect is anytime somebody talks about scale you have to ask what is the debasement trade-off because there just always is one and if you don't do that and you just think everything's magical and just you know strict upgrades you are making a mistake and so the problem with the base layer is um both the block size and the amount of like circulating satoshis and the dust limit ultimately limit how many utxos we can even create

um uh that have bitcoin in them and how how quickly we can create them so in order to actually get over roughly something like 80 million potential possible utxos with bitcoin in them we would have to say remove the dust limit that would free up more or reduce the dust limit that would free up more but then that would create trade-offs with like spam between notes yeah and so there are trade-offs there and but we don't actually know that the num the low lowest number we could do it probably could be lower than the current dust limit which is 564 570 i don't know i think it's 576 or something like that um but we car you could make it 50 and it probably would be okay who knows like people can do research and figure that out but even if

we do that we still only end up i don't know like a hundred and something million 200 million we still end up with a very relatively low number compared to society as a whole we do not end up with billions um and even if we wanted to onboard a billion people it would be severely limited by the block size like if you wanted to onboard billions of people you would definitely run the risk of never having your transaction confirmed in your lifetime like because the block size is too small to do the volume of utxo creation that you're talking about here so in order to actually get like billions of people using bitcoin and don't fucking kill me listeners like you would literally you would literally have to increase the amount of bitcoins you have to multiply the

supply and you would have to increase the block size unless magical people like gmax come up with something that has like very very agreeable trade-offs and you'd have to increase the block time too right i don't know about that yeah you'd have to see like this is i can concede that may be the case but it'd be also not right like again i think this is what we got to we got to like rhinestones like uh last last week we were talking like i do think there's like a future where you have like utxos are equivalent to what rhinestones were on the island of yap there's somewhat immobile move very infrequently um and i think this place i think that's what a utxo will be you know what i mean like it'll be like everybody just like is thankful for having a lightning

channel utxo and they just like use that their whole life hopefully you know because like block space should be rare you know it should not we should not keep increasing like i'm not saying we should multiply the supply i'm not saying we should increase the block size i'm just saying if you want the assumption of billions of people in here at the protocol level yeah at the protocol level holding their own keys self-sovereign you know that's what it would take right now now maybe you know smarter people than me can come up with the designs that have again they will have trade-offs maybe somebody smarter than me can come up with an agreeable trade-off to abstract utxos to have multiple accounts or somehow fix this without multiplying

the supply or without increasing the block size but there will be some other trade-off yeah a lot of people are saying the covenants could help with this as well um at the protocol layer yeah again i think this has been well known like even in safe like in the bitcoin standard safe made it very apparent like not everybody's going to be transacting at the protocol level which therefore means not everybody's going to have a utxo yeah well i believe like even how finney was talking about bitcoin banks and things in 2010 yeah so like it's well known but it's not well accepted like you go and say this stuff on twitter that i'm saying to you right now like people will block you people will unfollow you people will say you're a shit coiner people say

you're Roger Ver like you're gonna get all that stuff regardless of whether gmax would agree because a lot of especially the newer bitcoiners it takes years to learn bitcoin like they they have not done their research they have basically learned to memorize the memes and parrot you know the influencers and that's good enough for them and that'll get you pretty far but it won't make you understand bitcoin yeah i mean there are technical limitations yeah i think it should be well known it freaks you don't understand like right now as bitcoin is designed it is literally impossible for every human on earth to own a utxl and pretty much like bitcoin you have to say like blockchains do not scale they're they're like maximally redundant they do not scale and i mean

and that's part of the trade-off with bitcoin right like you're getting this lack of potential scale at the protocol layer for a sufficiently distributed sound and open monetary system yeah and this gets into some other things like how like i don't really believe in side chains as a form of scaling um especially the ones we have i don't even really believe in the proposed ones either because i think that like which ones do we have would you consider liquid a side chain yeah yeah uh well would i consider like with a side chain is the question you know side side side chains as originally defined were supposed to be pegs they were supposed to be like deterministic pegs and that design ended up not actually being possible as originally they believed it was

and they ended up with a federated design and so the federated design is just a private network you know um and the private network also with like a very small developer team you know that that basically decides what the protocol will be um and they have like some thermate hardware and other tricks that they do to try to make it you know safe but in the end like it's not bitcoin it's not it's it's not like deterministic to bitcoin it's not a layer on bitcoin um my definition of layer is something that is actually dependent on the thing below it it settles to the thing below it it does not settle it settles to the federation you know um it's permissioned um it's censored um you know like there are people who cannot become federation members they would not be allowed

see if north korea can join the federation it will not happen yeah um it's not so it's permission it is not voluntary it is not you know just strictly opt-in uh it's a private network with private rules and as a design when you start putting a blockchain there it's always the same argument that we were arguing against in 2016 with bitcoin uncensored talking about blockchains don't scale you know we don't blockchain all the things it's ridiculous you don't need a blockchain for that it applies in every single situation including including liquid including um drive chains and what what paul sports wants to do paul stortz i guess people won't get that joke too many years um you know paul stortz uh you know he wants to do i think it's bit 301

bit 300 300 and he wants to basically make a better way to do side chains i would agree that it's probably a better way than liquid um it does come with a whole new set of trade-offs a whole new set of trusts you know related to mining and merge mining and things like this it's probably you know it probably offers at least a different you know uh trade-off set that might be more appealing to people than liquid but in the end like a blockchain was designed to have mining it was designed to be part of the entire design of bitcoin if you start pulling pieces out and putting you know just taking the blockchain database aspect or the transacting aspect or the blocks aspect and just rip out pieces and call that a layer that's not the same thing you

know what i mean that's first of all blockchains still don't scale and so you know even if you take out mining or take out this or that like they still don't scale they're still supposed to be highly redundant and so that means that any success of your side chain is just another scaling problem with more trade-offs and you're already having to adopt probably pretty serious trade-offs to even use that chain and the arguments are that like we can kill shit coins this way like this is paul's like big thing is he thinks you know we're letting shit coins win by not you know supporting his design and i just don't believe that i think the reason why people use shit coins is because they want to be able to like you know have higher risk reward potential uh they just they're just willing

to take a high risk and low security and more trust to have more potential at short-term gains it's just a high time preference behavior and that's just all it is and unless paul has a plan for like you know getting people to shit coin on bitcoin and and for some reason justifying that that's what we want here and that the community will support here then he's going to be wrong because shit coins i don't know just my opinion like if you're if you care about blockchains i really do think shit coins are actually better than side chains like i wouldn't use either one but like if you think about it at least they get to have their own separate network they get to control like you know details about how mining works and issuance and actually have an intact

blockchain whereas a side chain is like some mutation with missing pieces yeah i mean i'm trying because i i want to speak more eloquently on side change i just can't i've talked to paul and understand it's not fair for me to talk about it without him here and he wouldn't obviously know better about his own thing than i would but just as a kind of design axiom and this is another thing like with our company like we just will not use blockchains like i just do not support blockchains as a design through my own research i just do not think they scale bitcoin i think they compete with bitcoin i don't want to see a soft fork bitcoin and add more assumptions and

more risks and more trade-offs and more potential debasements or whatever kind of weird things i just want to be like the the the conservative about bitcoin changes just anchoring into the protocol and leveraging that um yeah i agree i tend to agree yeah i don't particularly around like mining it's very specific and that's we can get that in a whole nother rabbit hole like even the word blockchain is just a huge fucking misnomer that we probably should have never been marketing widely like we probably should have stuck with time chain because that really drives they would have done the same thing with time chain like oh we have time chains are using a time chain for that like time chain i think really drives home because we could talk about

it drives on the importance of proof of work right and why satoshi chose proof of work with the 10 minute block production specifically because it is to essentially create a sequence of time in an asynchronous manner in a global matter right yeah people all ultimately have to sync on each block um and the 10 minutes is just because of latency and you know making that actually feasible and that's why small shit coins with small block times are obviously going to be less stable um i don't have an issue with blockchain as far as like the the name of the concept time chain blockchain i don't care i think time chain would drive home the importance of mining and its nature but also like blockchain is pretty bad at keeping time like yes there's

sequent there's sequential enforcement but like the actual time it's not a very good time chain you know what i mean like blocks can be 10 minutes they can be an hour they can be two hours i don't think it's purporting i don't think it's purporting to be an accurate measure of time it's just like an accurate measure of sequential events those events could happen into different intervals yeah it's yeah but blocks doesn't really drive home blockchain doesn't drive from the temporal nature of the block production right i just don't think there actually is like i think the only temporal nature is that there's a sequence yeah you know and so that's the chain part and whether you want to call the sequence a sequence of blocks or a sequence of times or you know of time i don't

know it's like splitting tears that's the kind of bike shedding i don't like that's actually the comment that almost got me banned from bitcoin core was i said to dave harding um i said look if we're going to argue about whether i was like first of all everybody knows blockchain is one word it's just like it's like it's just one of those things everybody knows that everybody knows sorry like i can't point to the dictionary and or some like official source that says so but like everybody knows and i'm not going to bike shed with you that blockchain has you know a space in it because it's also has a space in it somewhere else in the bitcoin code fix that too then and i said what i could do is i could sit here and i could troll you and say that it should actually

be time chain and he was like oh i know your i know your reputation i know you will really will troll me and if you continue i will ban you you know and so it's like dude like i'm just making a point i'm just saying like can we not it's we have bigger pressure fright we don't need to focus on a space i get that yeah um yeah it's fascinating we uh we're getting through a lot of the good morning tweets yeah i don't want to like go through the list of all of them but if you have anything you want to bring up anything anything spicy you think that i'm saying i'm happy to answer for it no i don't again we talked through a lot of it last week and i think we've covered most of it here you probably even covered some of these things in our original podcast i would

not be surprised if i go back and listen and be like oh that's what that was one of the good morning tweets like we probably talked in the past about like how i don't think bitcoin is fungible like one of the good morning tweets was like one btc does not equal one btc um that's spicy i disagree with that why well you're wrong um well show me in the market just in general show me the utx it's very easy um just in general um as a as a like physics concept the concept of fungibility is absurd you know of one thing equaling any other thing equality as a concept is absurd other than like in a very controlled specific mathematical environment where you could semantically say these things are treated fungibly but anytime but bitcoin is

literally made to separate the ownership of which sats between which sats every utxo is literally a different size when you go to spend it will have a different cost when you spend it and just that alone like just the fact that you are literally making every single UTXO unique and tracking their uniqueness means that those you know every UTXO is not fungible and then within the UTXO you could argue like those these these SATs inside of it are fungible because they are all the same but you never get to actually use them that way as soon as you go to spend them you have to pay a fee related to the size of the UTXO you created and that fee is unique every time so like you might you might pay a different amount for 10 000 sats today than you will pay in one minute

because of the fees the current fees on the on the on the mempool etc to get confirmed as fast as you want everything is totally unique every single time you do it and there are no two people that ever pay the same exact price for bitcoin because they're all paying at different moments the price is always moving they're all using different utxos spent from different pub keys everything about bitcoin is extremely unique it's extremely relative it's extremely proximal like it it's like the most unique thing to do with money and so so to say it's fungible it's just basically like misusing the word because the word is nonsense in the first place you have to misuse it and to kind of represent qualities of bitcoin that you would like to value like to

say like i like people often like confuse fungibility with privacy which is not the same thing it's like fungibility just means like maximum likeness you know but you can't get maximum likeness out of bitcoin like you have to pay different fees you have to pay you get a different market price every time you spend it like there's no there's no fungibleness you know yeah well again if we're gonna accept bad definitions and try to forfeit fungibility right it goes down to i guess fungibility in the sense that people are using it would be like so you just described like at different costs different fees different price of bitcoin purchasing power i guess you could say of sats at any given point in time

that you spend it like minus all those variables like the fungibility exists there at the end product like it will be accepted every utxo is a unique snowflake you know like it really is um and to and i think it's much more useful to portray it as infungible than to portray it is fungible because you don't end up with the confusion of the qualities of fungibility that supposedly exist like that you will get same price that you will get likeness you don't really get likeness out of your bitcoin then we're going to dive into the lightning network and like channels like spending sats without appending to the main chain those are certainly fungible and the definition and extreme likeness that people are maybe i'm not sure which what level you mean like

like literally the only time that bitcoins are actually fungible other than like the moment they're created is when they're actually used as fees um they're they get pretty close they don't uh become totally fungible because you still know like where they're where they lost their history but when you put bitcoin in as fees it actually is you know part of the mechanism yeah because it gets separated from the utxos that they came from and only so really only the miners have the ability to essentially wash bitcoin through fees and that that's something that would be interesting to see someday is you know miners can include their own bitcoin in the blocks that they mine and they can they can just include high fees that they know they're going to get themselves if they

want to wash their bitcoin well that was a theory that was brought to the fore during the minor no the china ban on mining like fees dropped precipitously um and that was like a big theory where the pools are just gassing fee markets with their own transactions. I think they definitely did that at the 2017 top. When the blocks are full, there's a lot of fun games you can play to basically seek the market rate.

That's all that's happening. In the end, there's a maximum price people are willing to pay. But because blocks aren't full, we aren't finding it. And I think that this was actually another good morning tweet, which was everybody is overpaying transaction fees

all the time as long as blocks aren't full. like the you should always be paying the one sat per bite um we're big advocates of that here at tftc yeah like it's just it's just it's so annoying like to see like that i have to pay eight sats per bite you don't have to no you don't have to but if i want it quickly like in other words even just for next block it should be that like everybody should be using segwit everybody should be saturating the blocks and everybody should be paying the minimum fee like there's no game that you should that you need to play to get in front of line yeah if you're if you're sending a segwit transaction you'll get in the segwit block and there's there's always space

what if the mempool is 30 000 transactions 60 000 transactions yeah i mean i would like well that only matters if they're all if there are ones that have more than one sat for bite you know if in other words if everybody played the game cooperatively and all did it and all included it basically what would happen is only the size of the mempool and how you know getting that and it would have to be fit in one block if the size of the mempool of transaction weighting is above like i don't know what's the theoretical it's the max theoretical max is like three or four megabytes if it's above that then yeah you would have to start competing for priority but at the moment we have had a block space open for a long time you know yeah yeah send those one sat per

bite fees freaks and wallets please you know like try not to like try not to one up the the estimate you know what i mean like a lot of like you see a lot of like uh inefficiency there where they're like well if they put it in the next block you know it would only cost eight sats per bite uh or whatever per weight or whatever it's called um and we're gonna put nine just to be safe or ten just to be safe like that inflates the rates and it adds up over time yeah um god it's been fascinating we have to get on to talking about your company yeah yeah so should we stop recording this sure yeah let's break it up and and take a little break i guess yeah what uh before we end this particular episode this has been a fascinating conversation i love the adversarial

thinking that we're bringing via this conversation to to the listeners um these are i would just describe it hard problems that bitcoin faces that as a user you need to face and come to grips with like you said like you can't just be all the memeing and the pumping uh and advocating for bitcoin publicly it's fun and you want to back it up with the knowledge of this technical aspect and the limitations of the network uh to to set expectations i i think bitcoiners and we've seen in the mining industry this year particularly um are setting bad expectations and that that can to lead to just annoying conversations in the future. Yeah. I guess I would end my comments with a plea, which is basically like, you know, as Bitcoiners try to self-examine and be willing

to learn about things about Bitcoin that make you uncomfortable and also try to treat people like me and others that are trying to explore these areas with the benefit of the doubt and a little bit more um you know accepting because i don't know like i'm a hardcore bitcoiner i've been a hardcore bitcoiner since the day pretty much i discovered bitcoin and i've been here about nine years now and it doesn't feel good to like try to like make these discoveries and like start and like really feel like you're starting to get a grip on how bitcoin works and then want to share that and then have your community reject you and think that you're trying to shit coin or think that you're trying to fork bitcoin or like accuse you of like being like some of the people you

yourself hate um it it takes a lot of uh bravery and stress to push through that um and it would be nice if the culture shifted more to like giving people like that the benefit of the doubt people like me people like luke people like eric voskul that like are really trying to like be sure about what's safe to do with bitcoin and and warn people about the risks and and so we can not never fuck this up and get the most we can out of it yeah i think it's extremely imperative that we think like this and have this adversarial mindset i do agree it had and matt has been echoing this as well like the bitcoin critics within bitcoin circle have been getting weak um yeah in recent years well we're we're pretty much shunned pretty quickly i mean hey i gotta have a conversation

with matt about privacy and all that bullshit is he gonna be able to handle it we'll see you're not a fan of whirlpool and all that stuff uh i'm just samurai i think everybody should just stay away from uh we can get i don't really want to get into it right now but i think a lot of people do already know like some of the risks there um but just like on-chain mixing is just nonsense honestly um i don't know how you're ever going to make that you know scalable or efficient i don't even know how much protection it really honestly gets you i would rather i i feel like there's always huge opportunity costs um with bitcoin research and development and so when i see something that has like all these like obvious admitted weaknesses i just really think people

would benefit a lot more from accepting them as weaknesses and as design limitations and then powering through like the other harder problems to solve because i think that's all we're doing is we're just delaying actually solving like making bitcoin private and being able to like dislocate your behavior and achieve privacy and stop leaking metadata and i have all like i have a lot of theories about privacy that i just think are are inconsistent with things like coin join and on-chain mixing and some of that stuff or the kind of trusting coordinators and i think they'll get better at it but i don't know i just think that like privacy is metadata and uh coin gen creates creates a lot of metadata you know and i just don't see how that can be the solution

fundamentally think about it freaks matt if you're listening you need to get you two on together maybe maybe it could be a citadel dispatch episode actually um if you guys want to get a little more expertise there like my plan is to like kind of tackle privacy like next year at some point like do a little more research myself see what's cool see what's not so cool and see how we want to start integrating privacy in our products yeah god another thing i wish i were to talk to you about is the transition from HTLCs to PTLCs. We've been having that conversation. Yeah, I'm not so researched there.

I would skip me on that one. I think there's some problems ahead with that transition too. Problems. It's October. We're approaching Halloween. This will be released, I believe, the day after Halloween or a couple days after.

But it's been the theme of the last few episodes is thinking through some of these hairy parts of Bitcoin that people just either are completely ignorant of or want to ignore because they're moon boys. I find it fun maybe there's something wrong with me but I think it's

really interesting well thank you for doing it John and it has been a pleasure as always I'm pumped that we're able to do this in person

in person interviews are so much better thank you for giving me a chance to explain myself you'll always have have room on this podcast to come

explain yourself still clutch clutching my pearls over the status comment but I don't apologize often all right

that's what we got for this week freaks john and i are going to stop recording here record another episode about the company he's been working on in stealth mode but is officially going to announce to the world at some point in the next few weeks and so once that is announced you'll be able to find that episode as well so make sure you subscribe and check in for that and follow john on twitter at bitcoin era log um somebody i've been following geez i think i've been following for like seven or eight years now on twitter you were like one of the og i appreciate that's probably when i joined yeah um yeah you've

gone you because you had like the error log you had like the exclamation point is your it was a red x red x that's what it was for a long time when i was like suiting on yeah yeah um so thank you enjoy peace and love freaks