TFTC: A Bitcoin Podcast - Rabbit Hole Recap: Week of 2018.08.27

Episode Date: August 29, 2018

In this episode we discuss: Vitalik Buterin's recent blog post on how to scale with layers The importance of soft forks CNBC's trash coverage WeChat and Alipay banned cryptocurrency commerce and chats The recent jump in hash rate Laurent's piece on measuring the value secured by PoW NIRP in Germany CFTF fine of German Bank for manipulating USD derivatives ETF denial then subsequent "reevaluation" Links: https://vitalik.ca/general/2018/08/26/layer_1.html https://twitter.com/matt_odell/status/963086673537126400?s=19 https://fred.stlouisfed.org/series/FEDFUNDS https://twitter.com/lopp/status/1019675622581391361 https://medium.com/@laurentmt/gravity-10e1a25d2ab2

we are gucci oh should we talk about the etfs didn't that happen after our pod so no fuck who cares um it happened after our pod did it what happened on thursday the band and then like say we're gonna reevaluate we're gonna review it yeah yeah we can just give it like a quick a quick uh tap tap yeah we can talk about it we'll give it a tap tap okay tap tap well what's up freaks you heard a little pre-show uh brainstorm there welcome back to uh rabbit hole recap with matt and marty uh we'll get to uh we'll get to the etf don't worry i just surprised matt he didn't know we were recording that that little pre ad lib yeah he pulled a fast one on me um yeah so welcome back to another week freaks

week too about to get it in the books a lot has happened in the last week um particularly what let's uh let's start with uh vitalik's admission italic buterin uh co-founder of ethereum uh lead scientists of the ethereum project somewhat argue a centralizing figure in the project i will say i'll say maybe not so anymore um but he came out with a with a with a blog post last night Basically, admitting something that Bitcoiners have been clamoring about for years, that development and capabilities at the base layer, layer one, the protocol layer, should be as few and simple as possible, and that all the complexity should be pushed to layers above the protocol layer. matt how do you how did you take this news it's very surprising it was basically keep the protocol layer simple use layer two for scaling which is what the bitcoin camp has been saying for the longest time now years now like almost half a decade i'm pretty sure and is the whole reason

ethereum exists is because it was the idea of base layer scaling over um pushing it to second layers pushing it to the second because vitalik was perturbed that he couldn't do what he wanted to do with bitcoin so he went to create ethereum right but now they ran into all these different troubles they're finding like maybe there was a reason he couldn't build on the product well like crypto kitties for instance was super successful for like an eight hour period or 10 hour period the whole network came to a grinding halt i remember during the ico craze when it was some random you people would go to send a ethereum transaction and it wasn't working and you would just you do a quick google search to see what ico was launched that day and that's

why no transactions were going through yeah um so it's just not an efficient way to scale and that's completely fine for him to acknowledge that but it kind of feels like a whitewashing of history a little bit you know like oh this is a genius idea yeah a lot of people are treating it like somebody met said it was master classes it was a master class master class uh paper i mean listen listen freaks like you can go you can roll back the tape i've been saying this for almost a year now i think the episode with pierre in particular part one or two we said this specifically right right so my whole so we all know i'm a bit of a of a village not a village idiot but like a village like lurker not necessarily building anything i understand a few

of the technicals uh but i really invest in and have an outlook on these projects based off heuristics uh one of which my favorite heuristics is is keep it simple stupid um and then uh an emagulation of this would be gall's law which is anything um any complex system that's ever become complex it's basically started out as a very simple function that is built throughout time just keep adding shit to it yes and any and any system that sets out to be complex from scratch and tries to build a bunch of complex functionalities out of the box will inevitably fail because uh that is not the way you scale especially distributed systems yeah from like a robust strength defense kind of way exactly uh smaller the attack surface yeah so my you are

my keep it simple so if i were to write if i were to be the the writer for the tetris uh bearish ethereum uh paper that they put out earlier this month it wouldn't have to be 42 pages would be like three sentences or two words would be like gall's law um so that's i'm sure what gets you a ton of lps ton of lps that's all you gotta say um let me get your thoughts on this uh what uh are we are we overreacting here no i mean we completely agree here there's no overreacting we're being very very polite about it i think actually uh it was a little bit infuriating at first but i've come around and just at least we finally have agreement on this so uh that's that you know i'm not gonna yeah we uh we were right point one for us told you so

we get we get to say the famous told you so all right i'll know the next one um we got we talked about this in the first episode uh core version 0.17 is being released uh next couple weeks here we should go back for a second that was he like hedged it a little bit right he still wants he just said like layer 2 has its place he still wants all these sharding and and different scenarios like that into play yeah so there'll be more told you so moments in the future Okay. It's good to know. It feels like the goalposts are moving a lot with Ethereum.

Yeah, exactly. That's what I'm saying. It was kind of like a little bit of a hedgy situation. Yeah, I would agree. It's interesting. You have Lubin going on a media tour. You've got to calm the markets. The important thing is to calm the markets.

Exactly. Lubin's going on a media tour. I saw he was on Yahoo Finance today talking about Ethereum. He was on, was it CNBC a couple days ago? I think he might have been on Bloomberg as well. Please, guys. I'm not selling. You don't sell.

We're all good here. We're good. please joe lubin also is one of the founders of ethereum uh he has like 15 of ethereum supply or something like that yeah something crazy and someone argues more powerful uh than vitalik myself included or has more influence i don't say powerful okay next topic my bad all right yeah we were getting on to it uh version core version 0.17 is coming out uh and there's a couple of upgrades and uh coming coming uh into the next version one of which being uh an improvement of spv nodes um which is basically going to allow um spv lightning nodes i believe which is pretty

cool it's uh the upgrade's called neutrino that's getting merged in i think over the next three or four major or two or three major releases and that's getting initiated in 0.17 um so that is uh something incredibly innovative is going to allow a lot of innovation and definitely something to keep your eye on and i thought this would be a good opportunity for you to explain uh how bitcoin is still innovative even though the development process is somewhat conservative because there's a lot of people out there that have said that bitcoin is inherently uh un-innovative because of its lack of its lack of ability to hard fork to basically get in better features.

I would argue that is completely false. And can you explain sort of the benefits of soft forks and backward compatible upgrades within Bitcoin? Well, that's always been the argument that the shit corners have given us. Most of the time, a lot of the times with these altcoins, what you see is they they they have this great idea to save bitcoin to make bitcoin better it gets rejected and then they go and they they launch their own coin um

it goes back to our earlier our earlier discussion right that you you want to keep it simple you want to keep everything as simple as possible as conservative as possible as slow as possible you're moving billions of dollars uh you you can't have a fuck up you can't have the littlest error can happen so you move slow steady and and you try and maintain backwards compatibility at all costs uh i mean you agree with that right pretty much yes now i think there might be a situation where where a hard fork is needed and there is a situation where a hard fork is we know it has to do with the unix clock i believe or or not the unix clock there's like there's like a y2k bug right something like that yeah y2k style bug where i think it's the year 2038 or something

like that it's a it's a while so um yeah but the consensus between people i've just scared the shit out of me so this is a good bug to like know about i don't know exactly what it's called but it's a y2k like bug uh that is going to force bitcoin to hard fork in the future um and it's pretty much guaranteed some people think there's a backwards compatible way but a lot of people think there isn't from what i can glean but that kind of situation it's it's really easy to get consensus um yeah it's like we either do this where the network implodes but i also think there'll be you know situations where it might be a lot more difficult to get consensus um privacy related stuff yeah basically privacy mostly privacy related stuff and if that

happens you know we'll cross that bridge when we cross it uh i i think i think that you know worst case scenario you have you have two chains running next to each other and uh and people will decide which one they they find more valuable but uh the the idea that you need to if you hard fork all the time and you make it like really common to hard fork like the ethereum community does like the monero community does you're basically you're adding an attack vector you're adding like this you're adding this situation where people can a central group of actors can just push through new code that that changes key key elements of the system yeah um so that i think the point we're trying to get across here is there are ways to be innovative

without hard forking and to assume that bitcoin is not innovative because it doesn't hard fork uh is is a very poor assumption in my opinion um it's like segwit was soft forked and arguably enabled lightning network and a ton of innovation was enabled because of that and it makes soft future soft forking even easier exactly uh yeah exactly i mean hard forks should be avoided at all costs and that that's a that's a feature that's not a you could be running you know one of the earliest versions of bitcoin and and it'll still work yeah it's pretty fucking cool um yeah so viva la decentralization um stay away from hard forks even though that's more to do with consensus and decentralization it's been a long day um next up on the list cnbc bullshit how about

that how about that post how about that that that uh segment they ran last night interviewed roger ver some kook in the woods and jordan belfort jordan belfort yeah the guy from uh wolf of wall street yeah upstanding citizen he was literally his qualification was i ran scams so bitcoin's a scam right and i didn't watch it yeah i don't think you watched it either right i watched like the two minute clip my dad watched it what do you think he said he said they didn't only say bad things so i think that's a plus okay he asked me who roger veer was uh uh or or you might have called him george veer or something he got him completely wrong but um yeah i mean screw that like they what's that law that there's a there's another law that's like if you if if you know a

topic really well and then you you you watch you know regular media about it you see how uninformed they are i just i there's no way that they went out and they were like let's make a well-informed docu whatever on bitcoin and then they they pick like tree guy i don't even know who he is roger ver and and belford is ridiculous i think they had draper on too my dad likes draper like draper um he's got a nice bitcoin tie he brought it up he's like you wore the bitcoin tie on the um hey this is cnbc fast money the the program that was shilling nautilus coin in 2014 and sold you all ripple at the top three dollars right at the top literally step by step walked you through how to buy it at the exact top so and their twitter account just trolls us they just put

out ridiculous content all the time yeah um so i want to put too much credence into anything cnbc pushes out i'm sorry cnbc that's uh a fault of your own doing over the years when they were pumping nautilus coin in 2014 that's when i was like all right this shit's getting brian kelly right we we member i remember that d-rack he spun up a shit coin with uh with bryce weiner remember d-rack it was like coupled with nautilus yeah yeah by gold or something good old bryce good old bryce and brian yeah the tag team of the shit queen days okay but anyway that cnbc thing was a trash piece and you know it's it just we figured it was worth mentioning because i'm sure people watched it but uh what are your what are your favorite sources of information i i you know

i i'm twitter and telegram right now for bitcoin stuff yeah uh is is there's nothing really else i would agree besides that i mean you should listen to this podcast as well yeah i would agree i would say but twitter twitter and telegram if you if you can twitter is definitely an addiction i've heard you talk about this before and like you really shouldn't spend that much time on it but if you do it's a really it's a really it's a really useful resource valuable resource um okay oh wechat and uh alibaba or alipay oh yeah they blocked it in china blocked it in china is this uh in order straight from uh i'm not sure from from the uh from the higher ups in china all i know is it looks like it was like uh it's to

block mostly like otc guys and stuff like that uh over the counter so basically like people people trading informally between each other uh i guess like china has famously banned bitcoin about like 15 times now i'll say more than that um and in this process a lot of the exchanges move off offshore and do all these different tricks and things and the otc market has really thrived there so in informal trades between people and a lot of that's organized through wechat and telegram specifically wechat in china is huge in alipay correct i i don't i i assume so okay because i've spoken to people in hong kong or i don't know it might be blocked there yeah it might be whatever wechat's number one it's like it's

like their twitter and their whatsapp and their i think it's like everything all combined into one yeah apparently and and now they're blocking all crypto transactions and i they might even be using keywords to block things i think they closed down some groups um so there's major censorship over there uh our hearts go out to our to our chinese brothers and sisters who are who are being uh censored out there um but it's another interesting thing to get into like it's been more being uh brought up in more and more conversations i've been having having with people like when are these nation states going to attack these cryptocurrencies and in earnest and china's uh china's been an interesting like testing ground for that well i mean i think

it's really interesting because we have a lot of pressing free speech battles going on in america right now um you know you have the whole alex jones and twitter situation um where he got deplatformed on all these different platforms and twitter didn't deplatform him people said twitter should deplatform him and some people said he shouldn't get deplatformed and then at the same time you have uh defense distributed with the guns uh and they're getting sued and he's uploading the files and and you have all that going on and then in china like you see what the end result is like just because even if you don't agree with people's politics you know at some point it's just an extremely slippery slope at some point they're going to come come for things

you agree with exactly no and that's actually one thing i was talking about today in particular was that defense distributed and i was saying like it's people should start paying a lot more attention to what's going on around them in particular because I think it's going to be a very telling precursor to how these governments might attack Bitcoin because it's very similar. First Amendment arguments that can be made for both Defense Distributed and Bitcoin in particular.

Right. Code is protected under free speech. Yeah. So definitely pay attention to what's going on with Defense Distributed. And again, I said this today on the podcast I was on, but I didn't grow up with guns. I wasn't allowed to watch Power Rangers because they had guns in them. But I very strongly believe in the First Amendment

and basically what's going on with Defense Distributed in particular. They're basically showing people the mechanics of how a gun is made. And you can go to a library and find these books. And this has been like, and Cody Wilson. They're uploading 3D printer blueprints for guns. That's the code to code to print your own. yeah but it's basically translating the book into a different language just a program that people are selling the book now they're a book of all the code on amazon and i think amazon actually

blocked it and they're selling it you know through different avenues and cody just opened up his website again and the block that they have on them doesn't stop him from sending him out his usb sticks so now he's sending him out his usb sticks uh so it should get interesting but i think i think the big takeaway which is like the core of the cypherpunk ethos is that you know we got to build these systems so that no one can get blocked and as long as if you build things that they can't get blocked this whole discussion just goes out the fucking window it's me because you can't block them you can't block anyone you know it doesn't matter if you agree with them you disagree with them and if people do illegal things or threaten people or or you know do any kind incite violence

or whatever then you know you do good old-fashioned police work and you press charges against them right yeah there will be law and order yeah there should yeah exactly no one's saying that you throw that out yeah but there is like a big like it's interesting to see how the media is reacting to defense distributed particular making them out to be a big boogeyman well they kind of are right i think the cat's out of the bag oh it definitely is yeah i mean this is gonna yeah even if for even though all of his all of his schematics are already out there even if if they somehow were able to get them back which they won't and throw him in jail and delete all of his files and everything like some kid in like bangladesh will come up with it you know or singapore or wherever

it doesn't even matter anywhere you just exactly and then upload them to the internet and then that's that right there's uh what's the the monster where you cut off its head it grows another what is that i know what you're talking about i can't name it i'm like in the days right now the hottest day of the year by the hydra the hydra yeah the hydra yeah exactly that's what it is talking about hydras on the hottest day of the year it's like 100 degrees in brooklyn today okay boom new topic yeah way too hot hash rate jump precipitous hash rate jump let's zoom in on this i think some people were saying 30 in one day which is insane it hit 62 exahash at some point it was hovering around yeah hover around 45 uh exahash uh on august 25th and at some point last

night yesterday uh it was at 62 so that's a 17 that's more than a 35 increase now it's worth noting that this is a it's a rough estimate because it's based on how many blocks are or mind in a certain amount of time exactly um and it could be partially statistical anomaly but uh it's a good sign nonetheless actually going up yeah interesting jump though but like patch rate continues to go up it's uh that's like one thing i was also talking about today like how long can it go at this pace like i'm interested to see like that's another thing we have to prepare for like can it can it keep this hockey stick growth for how long can it keep that hockey stick growth i think for a little bit now yeah what what will the what will the market

reaction be to uh to either plateauing of that growth or a decline i mean i think you have the two combinations right you have you have the efficiency of the chips is getting better um and the value of bitcoin is getting higher right and both of those should lead to to that hash rate going up you know continue to increase significantly i people always do this hash rate to price comparison thing yeah and i don't really they have an interesting relationship with each other um but i wouldn't say like one follows one or one follows the other no especially when you get to like the underlying mechanics of how these mining operations are actually working because once these miners put in the sunk cost of actually buying the rigs

and what you'll find is there's a good amount of time between when they initially put in the orders and when they receive the miners and are able to have them up and running. So if these miners are going to make that expenditure, they're going to plug them in. And what people don't realize is they're plugging them in after decisions they made six months ago. it's not necessarily like they bought them yesterday and like hey we're gonna mine bitcoin

and stuff like that yeah and they all have different expenses they all have variable expenses and they don't know you know so this whole idea that you can you can determine what the break-even cost is is ridiculous um they they all have they all have different costs different opportunity costs different situations they're in i mean like if you're in venezuela you can technically be losing money you know but you're not actually losing money because anything you get is is worth it right or um and and the other thing is and it's one of the reasons i tell people who are interested in mining to just leave that to the big boys and to buy some is is mining is like the ultimate like leveraged long-term play basically yeah because your payout is over time you're

committing all this sunk costs of the capex it's crazy so like so miners in general tend i think i would i would guess you know in this most recent run-up there's probably more people that took ridiculous risks and shouldn't are probably stronger hands right they're they're thinking on longer time scales they they have the money lined up you know they they're they're making a net profit every time they're running their miners and yeah it's uh another thing people we're talking about is the the uh switch of the burden of cost and mining going from capex to opex um so going from capital expenditure to some people think that these asic miners in particular are they're so in demand the price is getting driven to such a point where most of the

expenditure is going to be focused on making everything as efficient as possible at the firmware hardware uh and then obviously like you're and getting your electricity costs as low as possible exactly um i that goes back to our hockey stick hash hash rate like i i that that i don't think that has happened yet you're probably calling people are calling a little bit too early um but that's the goal it's the it's the commoditization of of mining hardware and then once you get to that point it's not like the asic you purchased is obsolete in a year um it's slightly obsolete but not completely obsolete right and then you can do all sorts of cool things like run them in boilers and use the extra heat to heat a home and then

you're able to mine for what otherwise would be a loss but but it's not a loss situations like that you get some really clever uh uses once you don't have to worry about the hardware going obsolete like right away yeah and you can really quest out that cheap energy interesting things ahead people so that's like a a cottage industry to think of if you're looking to build something out there like thinking 10 years ahead where there's going maybe maybe uh greenhouses that are that are powered by uh bitcoin miners or something like that no there was there was a company i think last year or something that came out with like a radiator that i mean like siberia right and asic is basically a radiator i think it was like a british company or something like

an asic is already basically a radiator just shooting out hot heat you know so they were like you can put it on your wall and it'll mine cryptocurrencies for you but it turns out that like right now it's like it's like a really shitty miner and a really shitty heater and it'll go obsolete really quickly because it's not worth it but that it the potential is there it'll be there in the future and uh i think this conversation is actually a perfect segue to a great article that came out yesterday from a very underrated bitcoiner i would say is laurent mt at laurent mt on twitter he's based out of paris he runs the block explorer oxt.me definitely check that out if you get a chance uh he did an incredible investigative report on the spam attacks of

the summers of 2015 and 2016 i believe uh just an overall very uh analytical mind and has really jumped into the data uh behind the bitcoin blockchain in particular and he uh released the first of a four-part series attempting to debunk the FUD around Bitcoin mining. You'll hear the headlines like Bitcoin mining is taking up 1% of the world's energy consumption or something like that. And everybody putting out these reports is trying to measure energy consumption based off of per transaction, like cost per transaction. and they're really coming to these final numbers of metrics from a wrong perspective.

They're not really taking into consideration the age of the UTXO set and the amount of power that it took to hash certain UTXOs at a certain point in time, which really come into play when you're trying to value the amount of energy consumed by Bitcoin in particular. So this paper, Gravity, is the first part. definitely check it out. It's on his Medium, at LaurentMT. And we'll put a link to it. We'll put a link to it in the pod.

We'll put a link in the show notes. We went over this a little bit, Matt. You want to dive into the details of what he was talking about? Or do you want me to dive in? I mean, basically, it's, you know, we have people that are trying to push a specific narrative, right? And that narrative is that Bitcoin is wasteful. um we see this but bitcoin mining is wasteful and we see this both in in the crypto world and

and from the outside in the crypto world you know they're like oh use pos or use this system or use that system bitcoin mining is wasteful um and then outside they're like it's an environmental disaster you know we got to shut this thing down and it's just it's the wrong way of looking at it Right. And he he puts it in a really interesting perspective on how that's flawed. Yeah, it dives into the math. So he thinks. So right now, a lot of these studies, like I said, they're basing their assumptions based off the cost of per transaction. And they're really leaving out two particular variables that that really draw a different picture once they're taken into consideration. And again, that is the age of a UTXO. So basically the metric that you should be following is how much value is being secured.

And you have to take in the whole UTXO set, including when a UTXO was created, how much energy it took, when it was created, and the difference between the energy it takes now to secure the whole network to when an old UTXO was created. Yeah. When you're mining a block, you're not just mining the transactions included in that block. Not only do those transactions have multiple outputs that, you know, aren't in each transaction, you have multiple outputs, but you're securing the whole network and every single transaction before it, all of that is happening every, you know, on average 10 minutes when, when, when a new block is found. yeah and so the conclusion of this paper just to bring it all together is um that basically bitcoin mining is becoming more and more efficient over time when you take in the supply or the reward happenings and the supply inflation and all the past transactions exactly um so uh that's a little little spin the table 180 on the mainstream media bitcoin's actually becoming more energy efficient over time and it's helping us find cleaner uh energies yeah on top of that it's it's the miners as we were talking about earlier miners will always go especially

as time goes on the main cost will be electricity and then you'll have subsidiary costs which is is which is labor you know land and like regulatory risk but the main cost is electricity So if you can get your electricity as cheap as possible, that's ideal. So that does two things. It directly incentivizes more efficient electricity. So we're going to have cheaper, better electric generation supply. And then it also happens to be that renewable is often the cheapest because they have these times where it's excess,

where renewable has this issue where it's not all the time it can't give you like if you have wind there's not enough there's not enough demand for the energy at all times well it goes both ways right yeah exactly for hydro there's not oh right it's hard to store it yes right so when and it's for some uh energy plants it's hard to justify keeping the lights on if they have all this excess energy at certain points of 24 hour day where it's not being used and they're sort of wasting the storage of it um so you bring bitcoin miners there you don't waste that energy you turn it into liquid bitcoin and you basically eliminate waste of energy so that would be a waste of energy it's basically it's like a synthetic synthetic battery exactly right so it's like instead of

storing it as energy which you lose like 40 of the energy when you store it because it's not efficient enough you just convert it to bitcoin and then you can store that energy export that energy anywhere you want in the world you just turn it to money yeah so you can have like operations you know you can have a wind operation in the middle of nowhere canada where no one lives and as long as you can get a decent internet connection out there you can just mine bitcoin on windmills out there or solar or whatever and no one has to be connected to it you don't have to be connected to a grid you just have to be connected to the internet yeah and then that's pretty crazy exactly and then on top of that like even with dirty energy like in oil refineries in

west texas like what people don't realize these oil refineries will sometimes or most of the times let off excess natural gas or methane into the atmosphere and it is terrible for the atmosphere when it's just left to go float into the atmosphere and destroy the ozone layer but what we're what in west texas in particular miners are going to those refineries capping that excess methane or natural gas i'm not sure which one it is um and then turning that it's not gas if we're talking about hash gen it's not gas yeah so it's not gas so they put like a storage container next to it and then they whenever there's these releases these excess releases of not gas they use it to mine bitcoin so the miners are turning on and off you know but when they when they're

being used the electricity is free basically they were throwing it out before it's like i'm i've heard like half a cent a kilowatt yeah i mean to the operator it's you know that it was going into the sky and there's money out of nowhere and for the earth i've actually talked to somebody who's didn't know about this is actually uh better for the earth if that energy is burnt instead of just sent into that makes sense to send it to send it to the atmosphere without being used um you know it's just and then you have there's so much waste in our current system you know like i had a guy that worked as an advisor for Lufthansa lecturing me about Bitcoin energy usage on Twitter.

We waste tons and tons of energy. The current banking system wastes tons and tons of energy. Bitcoin is a decentralized financial network. It's the base of this whole new trust-minimized system we might have. To all of a sudden say that's waste and these other things aren't waste is already ridiculous.

yeah and that's like and you can't stop it like tough luck if you don't like it you know hopefully it'll work out because you're not going to be able to stop that too but i do we talk about this a lot like bitcoin is helping people think in different ways and like what i say a lot about bitcoin from a monetary perspective like people never think about the concept of money and bitcoin is making people think about the concept of money and monetary policy and the history of it and how it affects our everyday lives then like you attack it from other angles like mining efficiency efficiency and energy efficiency like you're finding like all right now you start questioning all right bitcoin's taking up one percent of the consuming one percent of the world's energy

allegedly because people have done the math and they think it's precipitously lower than one percent um but even if it were one percent like all right what's the benchmark like what do you what are you benchmarking bitcoin's consumption against against and if we're going to do like monetary stuff like this is pretty heady i thought about this earlier today like how much energy is consumed to make sure that the u.s dollar remains the world reserve currency and remains the petrodollar it decides like if you if you rope in the military then you're just estimates just i don't even know where you put it on the graph exactly it's crazy exactly you you rope in the military all the contractors that come in with that all the rebuilding you have to

do after you blow up countries and the tanks it was like your pod with joe or earlier this week or did you dropped it today today yeah so it'll be yesterday when you guys hear this um you know joe was talking he made a good point he's like at the end of the day fiat's value depends on the trust and whatever government issues the fiat right yeah so like you gotta rope in all those costs yeah they're they're key to backing the whole that whole system right but again as a benchmark it's like okay this is true this may be true but let's take a look inside so before you get angry and scream bloody murder let's uh let's let's evaluate the situation here and and weigh the pros and cons and i think the pros of bitcoin mining and the incentives of the game theory that

are built into bitcoin mining are an overall actually not an overall like a extremely net uh positive to human society extreme net positive yeah i mean i think it i think it puts like you know people talk about like carbon credits uh to incentivize companies to pollute less you know that's this this so you know this extra idea they add on top at its core like bitcoin is is a direct market driven incentive yeah and it it it it puts a dead-on value to energy like a base layer value to energy production which is like it's just pretty crazy to think about the implications are are so fucking huge and it just devolves into this argument about how bitcoin's a waste so it's it's a little bit frustrating so uh for all you freaks out there who may have families

members who are pushing this narrative on you tell me check out the pod where you can take them to school yourselves and and ask them to think ask them to think critically about about what they're saying because i think a lot of people will just say this and again it goes back to media narratives like those media is trying to create these boogeymen out there um not this media that we're that we're speaking through right now yeah we're a boogeyman as well yeah we might be don't trust us don't ever trust us don't trust anyone don't you just you're on your own trust yourself you're on you're on your own do your um do we have any diligence do we have any parting notes on mining um the hash rate jump i i think it's important to realize that the key thing that satoshi figured

out wasn't blockchain it was pow like that is it's the base of all this shit it's the cool it's it creates it creates the the trust minimized environment because everyone's just working in their own best interest to secure this thing i forget who brought it up today but somebody was saying we should stop calling it proof of work because that's really a misnomer proof of work derives from adam back's definition and hash calf as you had to prove computational work so you can prove you weren't a spammer um with bitcoin bitcoin is more analogous to a clock some people will say did you see that floating around today yeah i kind of did yeah and that's actually something i would it's like i slightly agree with that like bitcoin's maybe if it's not

a clock is like a metronome like a like creating global consensus roughly every 10 minutes i like proof of work because i you know i think that even if you're not a miner you know you go to work in the morning right and then you can convert that work into bitcoin right so so we're all we're all doing proof of work together whether you're buying it or whether you're mining it You know, you're you're literally we have this ledger that says these people did work and it's stored. Yeah. So Santi Siri, who I spoke with in Chicago over the weekend, love that dude. He described he described proof of work as fabricating time with randomness to basically fabricating time and random data, which is an interesting way to to think about proof of work. because uh again there's uh there's multiple multiple paths at which you can approach

uh how you view these things um you just pointed at something what was it no i was oh i was jackson palmer doesn't like that idea well jackson palmer also out of himself as a socialist the other week i don't know how much you can take uh i don't know how i think we have to take what he says with a grain of salt from here no yeah i mean i that's that's neither here nor there i mean you can there's all these cool different ways to describe it i mean i like the um our buddy nick carter was talking about the the aluminum spelting analogy right because it's also i missed this what happened with that it's also like a very um electricity heavy process right so like the main cost is is electricity cost so so there was a lot of situations where

um they were searching for the cheapest the cheapest energy possible you know they were using hydro they were they were doing it in iceland where they were disconnected from the grid but it was a way to basically export energy um and it had a similar backlash because it had a had a had a very heavy electricity uh requirement and are you freak sappy with all the aluminum we have in the world has it helped our society as a whole i want to go back to tinfoil okay go back the tip okay let's go next topic what do we have here do we have any last topic nerp being rolled out in uh in germany no interest rate policy i'm trying to pull up the tweet now um but yeah apparently i think i believe uh particular um particular banking customers in germany good

luck pronouncing this bank what's the name of the bank marty hamburger sparkass i think i did a good job sparkassie well no i don't know we don't know hamburger sparkassie i'm sure one of the listeners will tell you that you're an idiot about it they're gonna levy they're gonna charge their depositors 40 bps if they have over 500 000 euro in private savings so 40 bps on an annual basis um correct yeah uh so if you have over 500 euro in uh 500 000 euro 500 000 euro in hamburg sparkassi uh i could be butchering that they're just gonna take money from you definitely rethink you're gonna you're paying you end up paying you're paying the bank to hold your money for you yeah um is that ethical is that a fee worth paying though i mean as long as it's

transparent like that's fine but you know we happen to have a better system better alternatives yeah but bitcoin i wouldn't argue that somebody like they painted themselves in the corner when you go down to zero yeah you know then you oh they have to go lower then you got to go negative right they definitely painted themselves in a corner like they'll never they'll never be able to raise in the federal reserve yeah you're just talking about this i'll never be able to raise above like three percent i don't think not even i don't even think they'll be able to approach three percent without i mean what are we at right now i think we're at 1.2 bips yeah maybe a little bit higher or 120 bps 1.2 percent maybe a little bit higher uh but either way i just i don't see how

you can raise it much without just tanking everything tanking you know equities tanking real estate the things that have all exploded under the it really at its core money at its core it just uh destroys our ability to pay back our debt i mean and that's the thing is like is what i i often come back to is shit where are we at there you go 1.91 percent maybe i was wrong it might it might break his number it might break his number damn um really raising rates donald trump's been yelling that's what i'm saying they've been aggressive lately and i'm surprised that the market hasn't responded um you know we keep hitting all-time highs it's we've never been in this situation before you know like well definitely we should link this this fred graph

in there like when people say that's the way it's always been it's just a complete fucking crock of shit because you know we were on the gold standard um you know 50 years ago basically and we've never had rates this low and we've had this government-fueled bubble never had this rates so who the hell knows what's gonna happen never had rates of this low for this extended period of time i mean they hovered around like 0.05 bips to like 0.75 bips for a decade uh bips for you non-financial nerds out there is basis points which is anything to the the right of the decimal point percentages um yeah so it's interesting that's and that i mean that is the use case of bitcoin that's

another interesting thing uh when my conversation with joe that dropped yesterday is that like it's interesting to see like some countries going through inflation bouts like turkey without like printing an insane amount of money it was basically just a collapse in the loss of faith yeah loss of faith of the law and order of the country there's many ways in which a currency can can unravel i mean i think these like weaker countries are just they're going to get hit first by you know all this and first it'll be like the usd is stronger the the yuan stronger the euro is stronger but but bitcoin is just going to be chugging you know behind behind the scenes and and they're the first to fall they just i mean i i i forget where it was from but

like the average the average lifespan of a fiat currency was it a dead fiat currency though i think it was a little bit opposite of survivorship bias but it was like 15 years or something 12 years so it's like a little sheltered american thinking to think you know oh it won't happen in my country like yeah it probably won't happen in the u.s anytime soon yeah um and i think that's uh because it's the uh the most polished piece of shit in the pile well it's just we're america you know we have the we have the military yeah you know we have we're a superpower america what else do we want to talk about that was all i had on my list what do you got No, I mean, I think it was, like, kind of a slow week.

Oh, the ETFs. Oh, yeah, the ETFs, right. Oh, we started the pod with the ETFs. We forgot about them. Right after our pod dropped last week, they were supposed to do. The SEC. The SEC was supposed to do a decision on two ETFs, I think. But instead, they said nine were all out.

um and then so then the market tanked obviously even though we all knew that they were going to say no and then a day later or two days later they announced they were reviewing that decision for for an indeterminate amount of time so we don't know when when they'll review it and then the market bounced yeah on the news there's been a lot of debate about the the need for an etf and whether it's good or bad for bitcoin um i am admittedly a little bit uh ignorant into this the like the uh argument from both sides would you be able to give it to us well we went over this in the last pod we shouldn't i mean look i the etfs i think are inevitable i think we don't need them but they're they're gonna happen and they'll be a net good i think i was talking more

about like caitlin long's appearance on yeah i mean she's afraid of fractional situations yeah um and i think i we definitely talked about because bitcoin is going to go up forever by design right it'll it'll go up and down but it's it's theoretically like should go up trend up forever so if you're fractional reserve you're going to get caught in one of the bull runs and you know if the market hasn't already decided that that you're a worthless fund then you'll be worthless at that point right yeah like i don't i don't think they can pull the same shenanigans that people say that they possibly pull on gold um i think yeah because you can audit the block the supply is too too fixed you know it's like you know you want to try you can try people want

to do this whole you know fractional thing with bitcoin you can try you're gonna end up you'll probably end up getting burnt and it'll just work itself out is what i think and i think that just in general an etf just gives gives more buyers uh more people that want exposure to bitcoin an easy way to do it they don't have to worry about custody and stuff so even though i would never own one it might as well be there you know like if you know exactly like if i if someone comes up to me and says i want to own some bitcoin and i don't want to deal anything with any of the technology or whatsoever i don't have an answer for them right now you know but if you had an etf i could just be like buy some of that etf i know the guys that run it they probably

won't lose all your money you know and uh and buy that buy that and and you'll get some exposure out of it yeah but but don't like hold your breath you know we've been talking about this shit since 2013 and uh at the end of the day we don't need it uh but but it's it's not something to be scared of either is all i'm saying all right last news item here we'll end on this uh from the traditional financial world the cftc uh just fined deutsche bank 70 million dollar penalty for attempted manipulation of the us dollar isda fix benchmark swap rate um so we have traditional banking system fucking with your fiat money uh this uh so they're basically trying to manipulate markets and manipulate a swap on a dollar derivative or something like that right reminds you the

whole library rigging exactly type of situation something similar yeah so the cftc stepped in here so this is definitely a futures contract um so just so you know uh people that are demonizing crypto out there for for vandals and uh vandals and and robbers and and nefarious people this type of crime happens in the traditional system let's talk about what manipulation is what is manipulation uh it's it's cornering the market in a certain way that you benefit but in a free market is there is there such thing as manipulation i would say that in the free market the only manipulation is is if a centralized exchange is like using the information they know of the order book and people stops and stuff like that to fuck with their customers i would say that is

wholehearted manipulation and and hopefully the market can figure that out these are the exchanges i don't trust to use well see what back up there i wouldn't even say it's the exchanges you back up you talk about LIBOR and other like the gold fixing price in London in particular, those two prices and rates that are set were set every, or still are set every day. Like they were manipulated heavily. And I don't think it's like you said, if these exchanges are actively working against their customers, I think with LIBOR and gold rates in particular,

it was traders trying to push the market in a certain direction based off of where their positions were where they had positions in the market they weren't necessarily nefariously trying to dupe their customers per se but what they didn't realize is that liber and gold fixing rates are rates that affect every fucking pension in america no but those are in the world like and that is an unethical manipulation those are centralized like the liber rigging scandals because isn't it like there was 15 or so banks that get to choose together the fucking g chat yeah exactly the i'm but i was my point was i was trying to bring it back to bitcoin when people say bitcoin manipulation that bitcoin is a manipulated market sorry for ranting because bitcoin is a

truly is the first time we've had anything close to a free market in you know our grandparents lifetimes at least um and what is manipulation in a truly unregulated free market if you don't know who the accounts are of the people on the exchanges you know you can't enforce wash trading right if one person has has two accounts on an exchange that doesn't do kyc and they're trading between each other there's no way for the exchange to stop that right yeah well this was well the chinese exchange is like okay okay but they're doing it themselves yeah right so that's a that's a little bit that's what i'm saying like i i think that we've had people specifically inside the crypto community like people like bitfinex that they scream manipulation about things

that bring into question what is manipulation to begin with right and i i i would i would be hesitant to say that anything short of a a centralized exchange an exchange of any sort basically operating against their customers so if you're like a whale right and you're sensing you know and and and bid for next is publishing how many shorts there are it's public information how many shorts there are and you decide to put in 20 million dollars to fucking pump the price and liquidate a bunch of shorts to affect positions on other exchanges and stuff, like, you're just playing the game.

You know, like, I wouldn't classify, I wouldn't specifically classify that as manipulation. I would classify that as a side effect of free markets and illiquid, you know, and something that has a very small float that's very easy to move around. And that's just what the end result's going to be. And so if you don't like that, like,

there's no solution like that's gonna it'll always be the way it is it'll take more and more money to do those kind of things is what happens over time it takes more and more money to do those kind of things yes the market becomes more saturated and less volatile right but there are certain exchanges that are probably trading against their customers and doing shady shit you know um and that should definitely be frowned upon and and you know hopefully the market will stop using them a lot of people uh accuse bitmex of that do you think bitmex is doing that because bitmex has a prop desk as well or something yeah i'm a little troubled with bitmex uh i think they offer a very compelling product and they've research is top-notch like they've been very

reliable i mean people are gonna get it when when when there's high trap when there's like high trading times they go down a lot it's like a meme but um they've never gotten hacked or anything like that um they seem to run like a pretty tight ship and but if they are trading against their people you know then that's a big no-no i i i i and and and i have an issue because bitmex makes it really easy for retail to go high leverage and you you people shouldn't be trading at high if i had easy if i had bitmex in 2014 2015 i'd have no bitcoin right now i just would have i would have heard it and we had okay casino back then but it was different you know bitmex is like way more polished bitmex is like way more polished it like tricks you into

complacency you know and it turns it into basically just straight up gambling because bitcoin is the float is there's the volatility is so high you know that you can get just get burned each way if you're using leverage it doesn't matter you could you could have called short from 14k and been trading short on bitmex and just have been liquidated now like 25 times you know 30 times just because every time you held it too long or turned in the wrong direction for a second before going down after it passed your stop just don't fuck with it yeah risk management people dollar cost average no no your limits i know mine i don't i don't fuck with leverage um all right you have uh and he also doesn't own a credit card but yeah i do own a

credit card you just got one uh what um so that's it should we just should we wrap her up yeah let's wrap her up let's do a little recap what do we hit no we shouldn't do a recap the recap people like the recap do you think so that's the feedback i got okay give us a recap marty all right we hit Vitalik's post, potentially an admission that the ethos of keeping the protocol level as dumb and simple as possible and pushing all the innovation to second layers, he dropped that. I would say that's an admission of something that a Bitcoiner has been clamoring about for years.

From that, we went on to the importance of softworks and being backwards compatible and that bitcoin is in fact innovative uh don't let people tell you it isn't uh then we talked about cnbc we see nbc bash for a little bit don't trust them they're pumping nautilus going in 2014 they're the worst just i don't even know why they exist anymore uh government strike back we chat alley pay uh all bitcoin related all cryptocurrency related exchange need to build the tools better need to build better tools um hash rate jumped we don't know why we don't know what it means apparently it's falling back down uh and then we jumped into lorenz piece which you should all check out we'll link to it in the in the bio uh in the show notes excuse me

and then uh nerp in germany and this cftc fine on deutsche bank or excuse me the other german bank hamburger and the etfs denied and reviewed etfs denied and reviewed there we go so that was uh this week in the rabbit hole recap thank you freaks for joining us we'll be back next week cheers guys peace and love