TFTC: A Bitcoin Podcast - Tales from the Crypt #7: Matt Corallo Pt. II

Episode Date: December 18, 2017

Catch Pt. II of Marty's conversation with Matt Corallo to hear them discuss Bitcoin's chances of succeeding, how Bitcoin makes people smarter, and how everyone is ignorant when it comes to Bitcoin + blockchains. Enjoy.

well yeah i mean i think i think the dow hack was really interesting when looking at ethereum like i was talking we were talking a bit earlier about kind of what the process for consensus changes might be and and what you know this culture war of bitcoin well i think another way to say culture war is what's the precedent what is the precedent for how changes are made and anytime you make a change that to some extent sets a precedent for the future about what kindness of changes are acceptable to the community and what the community you know is or isn't going to fight back against whatever um but when you talk about the dow well there's a precedent there it's a precedent that if you steal enough money and and the people kind of quote unquote in charge lose enough money

then fuck you that just gets reverted as long as it's reasonably technically possible to revert it what are you talking about the ethereum community came to consensus after the DAO fork yeah in like two days and there was a vote and there wasn't half a percentage

half a percentage of people voted half a percentage of ethereum something like that yeah um I don't blame them they were on a timeline and further I really wouldn't blame them like that's that's the kind of system they want to run and that's fine and i think there's a lot of value in that system existing it's not a system i'm interested in

it's not a system i want to contribute to it's certainly not a system i would put money in because i'm trusting that development community whether you think they're great developers or not doesn't really matter i don't want to trust them i got into bitcoin because i don't want to trust anyone and so i i have no interest in that but other people do and that's great now that's now i think we can build systems on top of bitcoin that have a similar trust model and also happen to use bitcoin the asset which is appreciated how much this year all right so how much uh can you talk about rsk how much do you know about rsk um i haven't looked at i mean the side chains obviously i know a pretty large volume about um or this case specifically i haven't dug into

in any material life but it's uh audible to sidechains because that's something i want to see implemented um obviously adam back in blockchain working on sidechains and then you have paul sports working on uh sidechains as well sports truth coin his his last name is I don't think he even knows how to pronounce it. Actually, I'm kidding, Paul. He definitely knows how to. I like Paul. But he's working on it.

I like him, too. His drive chain, I don't want to say theory, his drive chain idea is ingenious in my mind. So let's get into side chains and drive chains. What are they, and how will they help Bitcoin? All right. Excuse my rant. I'm a big fan of ranting.

Rant on. I like my soapboxes. I'm going to get up on my soapbox for a moment. So I think, you know, historically I've been one to work on various interesting things. I wrote the first payment channel implementation in 2013. Tried to get people to run it in 2014. No one's using it. No one's using payment channel today.

I mean, it was written in 2013, scaled beautifully. You could be talking about arbing between exchanges right now instantly and for zero fee, but no one uses it. I also wrote the peg in and out mechanism for sidechains. So sidechains at a high level is a concept of like, okay, so there's Bitcoin, there's this blockchain and Bitcoin. But, you know, maybe Bitcoin doesn't have the properties we want, whatever. So we're going to create this secondary blockchain. And the secondary blockchain is going to have maybe a different consensus model, but it's still going to use Bitcoin. And so you can kind of take your Bitcoin from the Bitcoin blockchain, you can lock it up on the Bitcoin blockchain, and then use it within the sidechain, and then withdraw it back to Bitcoin and use it however you want in Bitcoin.

So that's the idea, right? So I wrote the logic to move the Bitcoin between Bitcoin and the sidechain and back for the very first version of the Blockstream elements sidechain, which is kind of their catch-all brand name for their sidechain implementation stuff. And, you know, maybe it wasn't quite production ready, but in terms of, you know, whether or not you could use it a year after I wrote it, whatever, two years ago now, you could have. But no one uses it. so i think the the the difficult part in this space for all of these kinds of technologies whether it's payment channels or lightning or tumble bit or side chains or whatever the hard part is getting people to use it and so you know i think you know side chains kind of have two overarching security models getting back to security models

there's the federated model which is to say well you know we get coinbase and we get bitfinex and we get kraken and we get gemini and we get whoever else and we get them all together and they hold the money for the side chain so it's you know five of six multisig or whatever and they hold all the money for the side chain and then the side chain works or you can have the kind of hash rate model which is drive which is uh i guess kind of has now been co-opted by the term drive chains but it is broadly a side chain proposal um which is to say well x percentage of the bitcoin hash rate gets to hold the money for the side chain so 51 of the bitcoin hash rate decides fuck you i want to take the money they can take the money but if they don't then your die chain is secure um

now mining centralization is obviously kind of bad right now so the the drive chain bad but getting better and i think there's there's ideas how to do even better that hopefully will be implemented someday by someone magical i don't know maybe not um you're not referring to a pow changer no no no i i mean like a p2 pool kind of so so replacing pools which so you know if you're using bitcoin your concept of who a miner is is effectively the pool because the pool is making all the decisions for what block to mine on what transactions to include what transactions not to include blah blah all of those decisions are made by the pool not the individual kind of hashers. And so, you know, irrespective of how distributed the hash

rate is, it's how distributed the pools are and what hash rate different pools have that you kind of care about. But there's not kind of a technical reason for that. There's just kind of practical reasons for that. And building something in between P2 pool, P2 pool was kind of this idea of a decentralized pool. So all of the decisions about which transactions to include, which block to mine on blah blah blah all the things you care about if you're a bitcoin user are made by the individual miners and then the profit splitting part is is also decentralized but you could take the profit splitting part and centralize that and build a more centralized pool that still has the same properties from bitcoin's perspective of decentralization of hash rates anyway

slight digression um there's a lot of buzzwords for you freaks oh god it's just so much stuff it's a journey that's what john said last week it's a journey it really is you just got to start one article one wikipedia page one tweet at a time yeah no the the bitcoin is crazy we're still learning but that's the best part about it is that it's making us think about these things like i was explaining it to these to lewis uh who sometimes co-hosts this podcast with me um yesterday like so when you first get bitcoin from an exchange and then you move it to your computer like if you download like an electrum wallet and put it on your computer you're like all right i got my money on a computer my computer now how fucking secure is my computer like can

somebody get on it so you're like then you're forced to like go through like opsec sort of security scenarios and it forces you to learn about encryption about hardware wallets about paper wallets about brain wallets and yeah you and again we go back to money money drives everything in this world and you will do whatever it takes to secure your money and i think i think that's a big reason why bitcoin is so fascinating to so many people and part of why so many people got into bitcoin in 2011 back when it was you know it's not worth much it's kind of like whatever this is interesting but a big part of why is it ties together so many different fields ties together so many different parts of computer science and forces you to think about security and

forces you to think about distributed computing and forces you to think about all kinds of different things about computer science forces you to think about money like i mentioned at some point that bitcoiners seem to all have an opinion on monetary policy all of a sudden everyone has to think about economics and then broad economics like theory and game theory like there's just so many interesting topics that the second you get into bitcoin you just get pulled down this rabbit hole of all of these fascinating ideas and all these fascinating topics you just there's just so much to learn you and you're almost forced to learn it because again it goes back to the money aspect like people want to secure their money and they will go to any length

possible to make sure it's as secure as possible i mean if unless they're lazy but like for people that are serious about securing their money here's this thing here's this thing that's going up so much all your friends have it and so you bought some of it now you want to figure out what the fuck it is you're gonna start start reading about it and there's just so much to it pulls you into this learning rabbit hole and all of a sudden it's just addictive to learn all these things and uh i'm gonna recommend a good start to jump down this rabbit hole and that's jameson lopp's website his bitcoin resources page just start clicking on those links start going through them it's gonna take you a while but that's the best launching pad yeah there's some folks recently

It's been great to watch. There's some folks who've made enough money on Bitcoin to kind of retire to some extent. And they retired on Bitcoin and who've decided to spend their time just creating educational resources for Bitcoin. It's been great. It's been incredible. But that also reinforces the ethos of Bitcoin and why it's like these people, they could go chill on a beach in the Maldives. that could go buy a yacht and go yachting. Instead, they're like, no.

I'm going to teach people about pipeline. I'm going to teach people about this because it's that fucking important. That's something that we're witnessing now. We're going through another hype cycle. Every hype cycle, you have all the doubters, you have all the haters, you have everybody, but at the same time, you always have the,

I don't want to say converts, we're getting very religious at that point, but you have the people that are like, okay, oh shit, there is some utility here. is something here and the people that are willing to go down that rabbit hole and discover everything come out or no i don't think anybody's coming out of the rabbit hole and every and every time we what what what i'm really looking forward to honestly and and some people hate me for this but that's fine um i'm looking forward to the crash i'm looking forward to bitcoin being i mean

fuck at this point ten thousand dollars five thousand dollars a thousand dollars i'm looking forward to being cheap quote-unquote less than it is today for an extended period of time because that's when the people who got sucked down the rabbit hole they stick around because they're like this is fucking fascinating and they start reading about all these things and they they start engaging with the community and talking to people and you get to have really awesome conversations with all these people and then the really loud mouths you know the people who are like bitcoin is awesome and it's gonna save the world as long as the price keeps going up because everyone's gonna buy bitcoin and then the price is gonna go up and then everyone's gonna be rich right that's

how that works isn't that how that works i don't know how that works all those people disappear and it's just great like the bitcoin community becomes so much healthier it becomes so much it's interesting people who are fascinated by it want to build an awesome bitcoin want to build a really awesome cryptocurrency space and just want to work on that and not to like random people who were like ah yeah i'm making infinity money it's yeah and that's i mean in the long run we hope to convert all those people but for somebody who's who's lived through probably the longest protracted bear market in bitcoin's history up to this point which is after mount gox from 2014 till it was a while last summer yeah yeah or yeah it's probably an 18 month protracted bear market but

I got pulled into the rabbit hole and I haven't jumped out since but that was one of the when there wasn't it wasn't about price it was more about scaling you're talking about interesting ideas that's

lots of drama about scaling and again I think there's too much drama we're going to go back I think these things are going to change us more than we change them and I think that's a good thing in the long run uh it's going to be a process we're gonna have booms and busts on the way up but uh i do honestly truly believe wholeheartedly that we're gonna trend up and to the right over time in the long

run um yeah i mean i i this is not a prediction please sell your bitcoin if you've made a lot of money because i want the price to go down not because i want to buy more coins but just because i want the price to be low for a while but but but i really think bitcoin is either worth you know a million dollars at last trade it is either people a million dollars maybe it's hyperbole but you know either people accept it as a well maybe not but either people accept it as a real trustless store of value either people say like this is something that i can trust i can put money in this it is gold version two it is a gold that i can send across the world relatively easily you know i i'm in bitcoin to build payments ultimately but but to do that there has to be this underlying

level of secure stable bitcoin that is really trustworthy and that really you don't have to trust anyone to use it and then on top of that's lightning and sidechains and coinbase and whatever else right but either people accept it as that or it's worthless yeah and that's and if they accept it as that i mean we're talking about like millions of real a nation state might be thinking about buying bitcoin as part of their central bank holdings right we're talking about these kinds of fundamental shifts in the way people approach this or what was the point exactly and And sure, people are not going to be using Bitcoin to pay for their coffee. Sorry, it's not going to happen.

People are going to use their fucking dollar to pay for their coffee because the dollar is like something... The opportunity cost of spending your Bitcoin on a cup of coffee is too great to justify. Yeah, it is your national currency. It's what you get paid in. It's what things are priced in. We talked about monetary policy,

and irrespective of whether you think it's going to go up or down, like you don't use gold to pay for your coffee in the morning that's just what you do yeah i bring my gold bar and shave it down yeah you know it's just get a little coin and you hand that to the guy at the starbucks but i think that's that's maybe more analogous to bitcoin in the context of how people should be thinking about valuing it with some small probability that it actually happens but but valuing it and what its use cases will be i mean we're talking about people buying it in large volume to hold long-term value against potential risks that are kind of macro risks across the world and then hopefully also people can use bitcoin in a way that you

can't use gold to to transact with yeah also i mean that's the innovation about places where Or you have these macro risks where you're talking about like, okay, well, I am two nation states in the Middle East and can't transact because the treasury doesn't really like me and blah, blah, blah. And I want to do an oil deal. Well, maybe you'll use Bitcoin to actually settle that monetary value there. And I think that's become really interesting. And you're talking about censorship resistance. We can build Bitcoin to, you know, if you want to fund WikiLeaks or whatever, Julian Assange might be an asshole, but if you want to fund them, you certainly can't use Visa and you won't be able to use the dollar. Bitcoin can provide that alternative for you, and that's making sure that we provide this kind of censorship-resistant money that is built on something that really has a trustless store of value.

you're not trusting someone to use it you're not trusting a developer team you're not trusting the fed you're not trusting anyone unless you want to but you don't have to trust anyone story of value at the base layer i think is really no that's transformative it's very transformative and that's something people can't grasp right now because we've never had it before and people can't grasp that we have something in our hands that's never existed in the censorship resistant ledger what i really like what you touched on earlier which john and i had in a conversation uh post podcast that i wish was recorded but the way he described it's binary it's either worth zero or it's worth millions of dollars and i think that's right it's binary it's it's all or

nothing and i know let me be clear i still think if there's a five percent shot it succeeds it's not guaranteed it's not even the most likely outcome that it kind of becomes this million dollars per bitcoin asset like don't don't start betting your your retirement savings on this kind of thing this is you might get really fucking lucky but most likely you're going to get by most likely it's just not yeah gonna quote succeed why do you think there's so many things i'm still worried about about bitcoin i think mining centralization is a big question how does that trend in the future i would not still be working on bitcoin if i didn't still have a lot of hope for it i think there's you know a lot of the kind of environmentalist

arguments are overblown to some extent um because in large part not because they're like quote unquote wrong but in large part because bitcoin mining is this race to the bottom to find the cheapest power and the cheapest power in the world is renewable it just happens to be fucking cheaper hydro is by far the cheapest type of power in the world um hydro and geothermal um nat gas actually turns out to be kind of close which worries me to some extent um it depends yeah it depends on it depends on how cold it gets in the u.s and the winters because coming back from future markets like if you have severely cold winters like nat gas price is going to go up so it really depends on the weather with nat gas

And that, yes, might not be as sustainable, right? And if you're talking about sustainability, well, sustainability also matters for cost, right? If you're talking about especially futures markets, you're going to price things based on the sustainability of the market. So I think, you know, the cheapest power that people are Bitcoin miners are going to be pushed towards, assuming there's kind of a vaguely stable Bitcoin price, is going to be relatively renewable sources, primarily hydro and geothermal. and if that ends up being distributed i mean i think access to power is distributed on the kind of one megawatt scale it's easier to find one megawatt or five megawatts or not much more than five megawatts of cheap power than it is to buy a hundred megawatts of cheap power or 500 megawatts of cheap power so i think there's still a lot of potential decentralization pressure there that

we'll see as the market matures but it still worries me it's still something that i think if if mining power doesn't appropriately decentralize then bitcoin this like great trustless thing that might have a ton of value because you don't have to trust anyone to use it well okay fuck now you're trusting like one company or five people like whatever i that that destroys the value i'm a little more hopeful after this summer to be honest because i think again like you said i think i think node operators and exerted their their power yeah to an extent that i think a lot of people disregarded the the power that node operators had and people with node 2x uasf stood up and yeah i think the i mean there's a lot of lessons to be learned from the various forks this

this year right there's there's the uasf stuff which which you know irrespective of what your view is there's no question that some combination of you know everyone's gonna hate me for this depending on what your view is but some combination of uasf and nya activated segue right it was not just one no it seems like everyone thinks it's just one but but no it was the uasf movement which i and virtually everyone who contributes to core strongly disagreed with very strongly denounced again because of kind of lack of consensus it was a part of the community not the whole community whatever um but that provided some amount of pressure a very significant amount of pressure in my opinion to folks to do this kind of nya in a way that was even compatible with uasf right

But ultimately, if you were running a UASF node and you were running an NYA node, you know, up until whatever, three weeks ago, you would still be on the main chain. It ended up compatible with everyone. So that I think you can't discount that it was kind of a everyone got to say they won effort. Yeah. yeah which i think is really interesting when we talk about you know how to future consensus rules how to future consensus changes happen this like everyone got to say they won property seems actually to be very successful yeah um and and then we talk about you know the failure of 2x the kind of hard fork part of the nya uh i mean we talk about how that snowballed right there was

some you know there were some very vocal voices saying fuck you i want i want original bitcoin because of various issues about the uh kind of precedent and governance model that 2x implied and then kind of set for the future of bitcoin and then that was enough to make people say like shit well now now we as a business we have to make sure that we provide users access to both And so we have to have replay protection because otherwise we have to implement our own replay protection. And then that became a very significant thing. And so it just kind of snowballed. And I think that that's really interesting to look at.

I wish we had more kind of sociologists in Bitcoin because I think that's kind of an interesting sociological property of how Bitcoin consensus changes do or don't happen. is that it's snowballed from this kind of core group of saying like this has a bad impact on bitcoin in some way whether i think in large part based on the changes to consensus and precedent of how consensus changes happen and then snowballed into all of these companies who are like shit we're spending the last month of our time of our engineering hours trying to build their own replay protection engineering hours that could be spent making our matching engines not crash or exchange i mean look at all of the exchanges right now they're like failing to have their mat there are how many exchanges right now well their matching engines can't keep up with

the amount of volume and those engineering hours that were spent building their own replay protection for 2x could have been spent on matching engine right and again i don't want to get personal or anything but you're touching on like how hypocritical are these exchanges where they try to force this change the scaling change on bitcoin and they can't even scale their own fucking centralized websites like we've talked i i don't know if that's the right argument i mean you want to talk about hypocritical i mean but certainly No, I think it is a right argument because it is magnitudes of order harder to scale a decentralized system, and they're running centralized systems, and they can't even scale those. And if you're going to talk shit, you better back it up with some fucking, like, legitimacy.

see and i think i mean obviously there was a certain amount of like this is easy if everyone if everyone were to have agreed to segway 2x right let's let's pretend for a second that this core group which was actually pretty large but this kind of core group of community members of bitcoin users who were looking at segway 2x and saying this is a bad change to the trust to the trust model of bitcoin if they didn't exist segwit2x kind of would have been fine right i think kind of wouldn't have worked right for a little bit at least i mean i think there's technical issues in terms of the time scale and i think that the kind of trust model should have been improved so that it was clear it wasn't changing the whatever all of that aside

Let's pretend Segwit2x had six months of upgrade time and people and there wasn't this kind of New York agreement thing and there wasn't this kind of we're changing how Bitcoin consensus, we're setting a precedent of how Bitcoin consensus rules are made. Let's pretend all of that were the case, then, you know, Segwit2x would have been kind of no problem. And there's, when we talk about the folks who were proponents of SegWit2x, I think that was, quote unquote, their view, right? Their view was like, well, there's not much reason to object to it. And I think there was a kind of misunderstanding of the reasons why people might have objected to SegWit2x on principle against the kind of New York agreement stuff. um and and if that you know and so they just kind of like looked at that and said like okay well let's just do this it'll be a simple hard fork is needed now fees are relatively reliable so let's just do this hard fork and from the perspective of all these companies who are like you know maybe

could be working on matching engines segway 2x would just be no big deal it would be just change out your bitcoin core daemon for btc1 whatever and then and then you're fine of course the reality was there was strong community blowback and and new york agreement was kind of a mess and blah blah blah um and and so no one could do that your your users would have sued you that was just not practical in any way um and so it turned into a shit show but i can't it was an avoidable shit show it wasn't totally avoidable should show but i think there you know there's there's certain amount that we need to learn from it we need to stop and and be introspective about you know we need to hire some sociologists and to analyze kind of how the bitcoin community works and how

matt matt and i are starting a fund to to hire sociologists we'll put up we'll put up the address when we post this when we post this uh podcast no i mean i think there's there's there's a certain amount of like introspection and like sociological sociological level of how does bitcoin change well that i think this goes back to my point and that it's going to change us more than we change it like it's a bunch of people trying to apply traditional system uh as or traditional let me think of the right phrase i want to use it's a bunch of people trying to management to apply traditional management strategies to a completely new animal that we don't even understand and what we're going to find is this animal is going to change us more than we change it i'm going to

repeat it as much as i can i'm no i think that's right right i mean you're talking about like how these things snowball how potentially you can have a small objection turn into large part of the community saying this is fucking terrible yeah that that is very hostile to traditional management i mean that's it's it's really novel you look at a lot of people investing in this space and a lot of investors who don't spend a lot of time thinking deeply about how this is maybe different than traditional investments and their immediate response is well i prefer pcash or i prefer ethereum or i prefer whatever and that's fine you know if you want traditional management if you want someone if you want there to be a responsible party i mean maybe zcash is

the best example of this zcash has a responsible party is there is a foundation though well okay what they're marketing versus what they're putting out ignore whatever there is a ceo you can be anonymous until we decide we don't want you to be anonymous that's zcash's mentality right now the ceo makes statements that are that are maybe not not whatever there is a ceo right Like, Zucco has been very clear that this Zcash is the Zcash Foundation makes decisions for the consensus rules of the Zcash network and ultimately the buck stops with Zucco. And if you are an investor who looks at this space and you says, like, fuck, Bitcoin's a shit show. All these people arguing on Twitter and crypto Twitter is crazy and crypto Reddit is crazy and blah, blah, blah. I want there to be someone who's responsible,

you look at Zcash and you're like, well, there you go. There's a responsible party. There is someone who is ultimately the buck stops with him. And when I invest, I invest on the basis of whether or not I trust him. And well, that's great. Good luck with that.

Because you're investing in a centralized system. I think that this is what draws the distinction between Bitcoin and everything else in this space. This is why I work on Bitcoin and not something else. Because, I mean, let's be honest, there are technical changes that I would love to make to Bitcoin. I would love to have ability to change Bitcoin in all kinds of wonderful ways, make all kinds of changes. Great. But then what would I be working on?

I'd be working on yet another altcoin, yet another PayPal. I think that's the great example. Like, yet another PayPal, except, I mean, you know, maybe cryptographic PayPal, but centralized third-party PayPal. and i just am not interested in that yeah and again it goes back to these are raw nation technologies we don't understand them and it's going to take time like people are um trying to apply old world sort of mentalities and systems and management practices to these new technologies and i personally i'm gonna i'm gonna go out on a say a lot of most of these all these people that are trying to apply these old world management

systems are going to get blown the fuck out in the long run um yeah i think i yeah i would i mean i just wish everybody would be more modest in their approach to to this stuff uh there's a lot of people who who think they have all the answers but what we're gonna we're gonna realize is nobody does and and going back to the the question of governance i've said this multiple times on tales from the crypt governance is an emergent property of these systems it just is we reach governance every 10 minutes and whatever nodes run every 10 minutes is governance like there's no you're not going to apply a top-down structure yeah that leads us to governance obviously that's a simplification but but yeah no totally i mean the governance of these systems is like

it's based on precedent and it is emergent it is i mean i hate the word emergent now because it's kind of been bastardized in this space but i'm a bastard uh but but but yeah no it really is right i mean we talk about studying how segwit2x did or didn't fail and how uh the activation of segwit happened like that is something you study to figure out how the community works that's not something that you kind of define well here's how the community you know does these things and then that's the rules and it is a it's a thing about precedent and it's a thing about you know historic you study how historical changes happen to look to the future yeah yeah you have to take a retrospective look yeah to move forward yeah um how much time

we got i got time um what are you most excited about moving forward for bitcoin specifically what am i most excited about i'm excited about the adoption of these second layer and other systems right i i mean i mentioned briefly that this is something that i have worked on since 2013 right I implemented the very first payment channel implementation in the summer of 2013, and sidechain, peg-in, peg-out mechanism way back in the day. These are things that I've been working on for years and years, but have seen zero adoption, effectively. and we're at a position now where everyone's kind of looking at where they stand technically and thinking okay maybe it is time to start adopting these things maybe it's time to start really thinking about how we can fit these into our current business and fit these into our user

experience and finally finally seeing some adoption of these things that you know I've been working on for years is really exciting because it opens up bitcoin to all kinds of new possibilities all kinds of new trust models all kinds of new ways of interacting with bitcoin the asset that we haven't had until now so yeah that's that's absolutely we're entering a whole new world um so let's go let's go through lightning network what kind of use cases will this enable if if it becomes somewhat ubiquitous i think the most obvious is the the bitcoin side of arping right the the exchanges you know it's centralized more than more than lightning even is but but you talk about being able to hold money off of lightning network and off or off

of exchanges in your own own hands in a lightning wallet that is really your money that no one can take from you and sell it immediately in in you know less than well under a second that's really interesting for how the market works um and and also requires relatively limited kind of technical effort right there's a few companies they add lightning wallet and all of a sudden you can are between exchanges and you can hold your own money in your own lightning wallet deposit to an exchange instantly and sell instantly and then if you have bitcoin on one exchange you can move to another exchange instantly and sell and you can at least do the bitcoin side of the arb instantly and i think that is again right that's something that requires limited effort to start adopting

but also can make a big difference to both transaction volumes on the chain and how people interact with the bitcoin market so i think that'll be the first big thing we see and then after that it'll be you know me and all my friends who use bitcoin i'll be paying them in bitcoin they'll be paying me in bitcoin we'll be seeing things like um have like a venmo yeah venmo kind of like you know people who are doing payments within social networks payments within social networks not like the websites social not like facebook whatever but like social networks like me and my friends um will start using lightning and that kind of adoption yeah no and i think the the exchange arbing uh use case is is one with very high incentive too and yeah and one that

We'll get adopted quickly because this space is, I don't want to say dominated, but there's a lot of traders in this space. So that's definitely a good use case out of the box that will get used, in my opinion. I'd actually never heard of that use case, which is fascinating to me. i think i mean when i talk to exchange folks right now they're the ones it seems to me who are the most ready to start integrating this i mean you talk to a lot of the exchanges in this space they've integrated all kinds of random cryptocurrency garbage they've integrated you know iota whatever they're running like this daemon for some random cryptocurrency no one never really gave a shit about and whatever they're ready to adopt all kinds of new crazy

technology and i mean lightning's on that scale not at all crazy it's like great stable whatever compared to nonsense cryptocurrencies but what uh but at the same time it's a double-edged sword because lightning's gonna enable atomic swaps as well yeah potentially i mean i don't think we'll see good ux for that for a while a and b um so so let's back up what is an atomic ah there we go yeah that's important um so an atomic swap talk about when you're trading two cryptocurrencies right so you have you have iota and i have bitcoin and we want to trade at some price you can do this thing called an atomic swap which you both go on chain on your respective of cryptocurrency and either and it allows us to trade kind of person to person without going

through an exchange uh with lightning you could potentially do this instantly right so you don't have to go on chain and you can kind of get the some of the same properties but i would highlight that you still have to have some kind of order book you still have to have something that you can use because ultimately sure person-to-person exchanges are always going to be over the counter is always going to be an important part of bitcoin trading and you know local bitcoin whatever it's going to be an important part it's going to be there but it's not going to where people be where people go for price discovery it's not going to be the place where there is a ton of liquidity and people trading large volumes to discover what the price is on Bitcoin.

It's going to be where people trade small volumes person to person that they just don't want to use exchanges for whatever reason. And I think the same is true for lightning atomic swaps. It is going to require these kind of price discovery has to happen when you have an order book which you can trust. And the only way to have an order book which you can trust is for there to be an exchange which actually has the money to back it up like from the users right and so even if there's this lightning thing where you can deposit to an exchange instantly and issue

an order that's great but you're not going to get away from depositing to an exchange to make an order on the order book you need more information you need that trusted order book yeah and i don't think lightning is going to replace that it might take a dent into like some of the crypto to crypto exchange stuff that people are doing person to person right now and kind of decentralized exchange but it's not going to take the place of the price discovery stuff that makes a lot of sense it makes a lot of sense and so there's always going to be a market for centralized exchange yeah no no that's the one thing that also is like uh that we're also finding a lot of people in the space are misguided about is that we need to decentralize all the things

and sometimes yeah to a certain extent that's not it's not possible or not efficient idea it's just it's not always a thing right yeah that's it's i don't want to shit on ethereum too much but like that's their main marketing perspective is like let's blockchain all the things let's decentralized everything blockchain the tamagotchi no i but there's efficiencies in centralization to a certain extent there is and i think this is this was my point earlier that that we need to try our hardest to make sure that the decentralized systems we build are as efficient as we can make them and centralized systems are always going to be more efficient but we want to try to close that gap yeah and and closing that gap is important to making sure that people have

the ability to use bitcoin in a decentralized trustless and most importantly censorship resistant way whereas not closing that gap means you have to trust coinbase for everything yeah and that goes against the whole ethos of what this technology was created for yeah um so we were just what were we talking about i was about to ask you what do you so what do you want to talk about like what do you think is most important uh that needs to be touched on that we haven't touched on that we haven't touched on i mean we're out of pills by the way give me the lager i i will drink the ipa if i have to but thank you yeah so let's touch on that what uh what do you think that we haven't touched on that needs to

be touched on i don't know i mean i think the a lot of the conversation that i think is the most important right now for the bitcoin community but also anyone just getting into bitcoin is is this kind of sociological aspect of how changes get made to bitcoin and what does that mean for your trust model and who you're trusting and and and what is uh you know who is how do changes get made and how does that impact your ability to use the system in the same way they're using it now i think that's by far the most important kind of element to bitcoin right now that needs to be figured out as a community not not as individuals as community how does this happen we hire some sociologists i think that's what we've concluded we need to need to fund some

sociologists um but but i think it's also i mean i i mentioned that some folks refer to it as a culture war and i think that's that that is the right lens through which to look at it is what is the culture of changes to bitcoin that we want that that we believe in that we think uh you know creates a bitcoin that will last a long term that you know that we're willing to fight for all right let's touch on linux's culture then rough consensus is that working bitcoin yeah i mean well linux maybe is a separate thing linux is is very kind of centrally controlled there's a tree right there's there's linus and then for each of the kind of subsystems there's a subsystem maintainer and that is you know they're they're in charge of it it's more

you know it obviously i think works well in open choice it's kind of the model we're looking to move towards in bitcoin core for the non-consensus parts you know for rpc and the net logic and like all these things that no one cares about aside from bitcoin core like whatever so let's take a step back and deal in a between protocol changes and non-protocol changes yeah yeah so um so so you know there's there's a lot of parts of bitcoin core right there's the gui there's this like graphical user interface client that has like a window that pops up and like gives you send buttons and and you can do things and it has you know spinning widgets and whatever the fuck else i don't know i don't use it i have no fucking clue but like ultimately you know someone's

got to be responsible for making the spinning widgets be nice and pretty and that doesn't impact anyone who's not using bitcoin core right if you're using coinbase or you're using a mobile wallet or using whatever it is, you don't care what kind of spinning widgets there are in Bitcoin Core GUI. It just doesn't affect you. And so, you know, these are things that don't affect every Bitcoin user. They affect, you know, maybe users of Bitcoin Core's wallet, maybe users of Bitcoin Core as their client to check, you know, whatever, their wallet or the GUI or whatever. you know there's a lot of different 95 of the work in bitcoin core is just that or the performance of it or whatever all of these changes don't impact everyone who uses bitcoin they only impact

bitcoin core users and in a way that anyone you could go use anything else okay and so these are changes that you know i think we look more towards vaguely centralized not centralized in that way But more central structures, you know, we're not going and asking on Reddit whether we should merge some new performance improvement in Bitcoin Core. That would be absurd because who cares? So that's wholly separate from Bitcoin Core, the consensus part of it. So, you know, the consensus rules of Bitcoin, the rules about whether transactions are valid, whether blocks are valid, all of these things that obviously impacts everyone using Bitcoin, right? if you create a transaction and it's invalid according to the consensus rules it's no one's going to accept it that's invalid and so you know we draw a very very clear distinction at bitcoin

core between things that are not consensus rules and that we you know want to make progress on and want to build good software around and things that are consensus rules and things that you know we look to the community for adoption we don't you know try to make those rules on our own another bitcoin core contributor refers to bitcoin core as a process it is less a software project and more a process it is and you know i don't think that really is true for all of the non-consensus parts the wall is again 95 percent of the work 99 percent of the work it's a process but at the protocol level bitcoin core is a process it is a you know way we look to the community for changes and an adoption of these kind of ideas and and you know

what changes should be made to bitcoin um we had like a whole thing we were talking about something and then we kind of went into a we were dealing i have no idea what we were talking about earlier we were talking about how we reach consensus to change the protocol level and i asked you to distinguish protocol level and oh yeah so you so you asked about about linux and and other engineering communities and i think yeah so so you know draw a distinction between protocol level and non-protocol level and i think maybe linux is a good example of this stuff for the non-protocol level it's you know i think linux is even more centralized than bitcoin core by far in terms of how decisions are made about code level changes but we're trying to move maybe a bit more in that

direction bitcoin core to be honest has a scaling problem right now in terms of just the number of new contributors getting in and you know historically there's been four or eight people who have seen and reviewed almost every vaguely major change in the entire code base and all of a sudden it doesn't scale right all of a sudden we have more people coming in who want to work on making the spinning widgets spin faster and whatever the fuck else i don't know and you know finding the right uh finding the right threshold between you know everyone looking at everything and enough people looking at things such that there's no bugs in issues for people who use bitcoin core is something we're we're trying to find out right now whereas on the other hand

at the protocol level at the how bitcoin works at a protocol level the consensus rules and also the peer-to-peer network maybe a better example is the ietf so people who don't know what the ietf is the ietf is effectively what decides how the internet works they're a engineering body of engineers for engineers who decide you know big uh the how the how your web browser how firefox communicates to a server that's going to serve the page and what format that takes and all these kinds of weird details that just really really low level networking incredibly low level networking stuff that your average joe has no idea about stuff that your average engineer has no idea about even yeah um and their their model their i guess kind of motto of how they decide things which was

set years and years ago is quote you should pull it up but it's something like we reject to kings and democracy we believe in rough consensus and running code and i think that's more towards bitcoin at a consensus level we reject kings presidents and voting we believe in rough consensus and running code there we go that's it so this is years and years old of ietf this is how ietf views itself how they kind of try to make decisions um and i think that's more towards how people view bitcoin consensus changes especially the first part we reject the kings kings voting and and what was democracy presidents sorry we do not want kings voting or presidents and bitcoin no not even close we do not you don't want a democracy because at the end of the day

let's be truthful most people are stupid i'm sorry i hate to admit that ignore most people being stupid democracy is three wolves and a sheep deciding what to have for dinner yeah it doesn't end well for the sheep i've never heard that one i love that that's a i've never heard that's an adam back favorite really i've never heard that one holy shit adam loves that one but i think i think it's really fucking accurate for like what this actually means right um but i think you know democracy is not the borrower you want and in fact even rough consensus and running code is probably not quite enough rough consensus in bitcoin is probably not close but why not it it almost gets there so rough consensus in ietf needs a bit of explanation like what the fuck does a

rough consensus mean right so rough consensus in ietf largely means there are no outstanding objections which have not been addressed um so you know if there's some proposal to change how the internet works at a very low level and and bob comes up and bob says well here's the problem i think this doesn't quite work for this setup and this is going to cause problems on the internet the basic goal is that that should be addressed before this kind of proposed standard change rolls forward and i think that's probably true of bitcoin at least that part of it of like yes if there is someone who shows up and says this change is going to affect my ability to use bitcoin yeah that damn well better be addressed before that change happens

however in ietf that means to some extent there there is kind of a formal hierarchy and there's there's this formal uh setup for how uh changes get accepted and how people decide whether or a change has been sufficiently addressed and there's ultimately kind of one person in each working group who can say like well that change is bullshit and you're you're just bullshitting and fuck you um and then there's like this whole thing if like people object then they like roll dice and like this whole thing comes down to a dice roll there's there's a formal process in that etf to come down to i believe it's a coin flip not a dice roll it never gets used because that's not practical but but if we're talking about bitcoin and money and something that is maybe

even more contentious than not wanting to come down to the dice arguments about whatever you don't want it you don't want to coin flip that's not how you really want to so i think ietf is maybe the best model that we have for analogies to how i would like bitcoin to work in the long term but it is certainly not sufficient and i'm trying to say like well ietf is how bitcoin's going to work i think that ignores a lot of the differences between bitcoin and everything else bitcoin might set a new standard i think bitcoin is going to be a very different way of thinking about changes to protocols then no and this i mean it goes back to the theme of what we've been talking about tonight it's just like we have no idea like what these technologies yeah

definitely they're going to do to us and that's why i love what john's advice was last week is just like all you can do is learn more just try and learn as much as possible like begin your journey just continue reading like we said anybody that says they're an expert is an asshole like nobody knows been my full-time job to figure out bitcoin for i mean since high school yeah i mean i've been working almost full-time since high school took some time off in college like i actually you know had a college that i you know went to it was fun what college unc Chapel Hill. Boss?

Chapel Hill was a lot of fun. Love Chapel Hill. Still fucking hate Duke. They're all assholes. Fuck anyone who ever went to Duke. Fucking people. God. It's a different breed.

I will say this. It's a different breed. It's a different breed. In high school, we used to go down to Duke and do spring training for lacrosse down there. I'm not a Duke guy at all. Oh. Oh, I'm sorry. I remember the Tobacco Road rivalry very vividly.

Yeah. Yeah. No, the rivalry is fun, if nothing else. But yeah, I mean, all that said, it's been almost my full-time job since 2011 to figure out Bitcoin. I still don't think I know Bitcoin. I'm not an expert, per se. Maybe I know better than most, but I'm still learning. And that's why I think people become so enamored with it.

It's like, holy shit, what the fuck is this? Like, I need to figure it out. And the further you dig, the less you know. And that's the craziest part. Yeah. The further you dig, the less you know. And that's my favorite part about these new adoption waves is everybody coming in like, oh, I just discovered the blockchain.

I know how to fix it. Oh, yeah. Watching people get humbled in real time is – I don't want to – I think it's Jimmy Song who – was it Jimmy Song who had this chart that he said of like, you know, when you get into Bitcoin, you're like, wow, I don't know anything. And then for the first like six months, you're like, wow, I'm becoming an expert. and then like six months in you're like wow i fucking know bitcoin i get it and you're like explaining it to people and then kind of seven months you realize no you're an idiot and actually

no one has any fucking clue what the hell this thing is and everyone's still trying to figure it out and i i i do know exactly what you're talking about i don't know i don't know if jimmy or somebody else is is the uh the the source of that that chart yeah i have seen that chart like you first six months in you're like all right i'm picking it up picking up expert and then three months later you come to the realization that you don't know shit like what the fuck is that and that's why it's so great to be alive right now it's like we have something that finally like it's such a such a diametrically opposed system to what we grew up in where we grew up in a system where it's like all right you you go to school you go to kindergarten through senior

year of high school then you go to college and this is the way life works like you do this this this you have this schedule you become a professional you knock up somebody you get married you raise a family restart the whole cycle again and then bitcoin just comes in it's like i'm gonna fuck up this cycle and it's it's we're literally like it and that's why i'm so drawn to it's like what the fuck is like i need to know what this is doing to us and i mean it has the potential to be world change it is i would argue that it already has changed the world to a certain extent just getting people thinking about this stuff yeah i mean potentially i mean i i was at thanksgiving whatever thanksgiving was what two weeks ago and uh talking to one of my

second cousins i guess and and she was just kind of like yeah you know i'm recently getting into cryptocurrencies i've got a colleague at work teaching me about it i'm investing in litecoin i was like ah you know cool i mean hey it wasn't it wasn't iota so i had a lot of people ask about litecoin this week really litecoin that's like yeah well that's fucking coinbase like that's true that's true options like litecoin and bitcoin that's the other thing i mean i'd buy litecoin over bcash right oh definitely definitely i mean in order of magnitude i think the uh The use case of Litecoin as a testnet is a good use case. Well, Litecoin is Bitcoin, but centralized-ish control.

Yeah. Right? If you want a, these developers are competent, they know what they're doing, but it's not Bitcoin in the sense that they're taking slightly more explicit control than Bitcoin. It's Litecoin. That's the thing I would go use. It's not like ETH is crazy move fast and break things. litecoin is we're developers we're conservative but we are kind of in control of this system yeah bitcoin is no one's in control this is just a fucking roller coaster let's see where it goes

like litecoin i mean it makes sense as a product that you might wish to invest i don't have any fucking litecoin but but i understand why some people like it no i don't but i don't think people understand i don't know it no one has any fucking i don't think anybody understands it like you would think they do it's just they see they see the options when they sign up for coinbase should i buy ethereum like one or bitcoin it's like oh well like coins like just like bitcoin but it's cheaper well way cheaper like you should buy the cheaper one yeah yeah that's totally how do we get away from like like i'm like tired of like dealing with that argument i don't know man now at this point it's like all right go for it yeah we'll see how it plays out

in the long run um it's no it's tough that's the other thing like you have such a myself at least definitely like such like uh you think you have control of i don't want to say the narrative but like you feel like you can explain this to people in layman's terms like like off the bat and then you're just confronted with him it's like whoa like i truly don't understand this shit yeah yeah no totally i yeah man i can't explain this to anyone i a very very good friend of mine recently was coming to me and was like yeah i'm gonna buy some some bitcoin some ethereum and i was sitting there thinking to myself i'm like you know i would really like to spend some time explaining to you someone who's very technical

like you know really smart technically you know i'd really like to spend some time explaining to you why ethereum is in my opinion just just vaguely you know largely poor technical decisions a series of poor technical decisions in my opinion and then i thought about it for a minute i'm like holy fuck i'm gonna spend like six hours explaining to you why i think ethereum is less valuable than bitcoin in the long term do i really want to spend six hours explaining that to you or do i just want to say like not even yeah yeah i'm just like wait i don't want to you you're gonna invest in both great better than and also to some extent like fuck the markets in this space are absurdly irrational i i like to say that i i mean i i

have fully stopped trying to day trade in this space it's absurd i stopped years ago it's not even worth it yeah i stopped years ago largely because you know i look at all these things through a lens of technical you know do i think your project is technically capable do i think it's going to go somewhere technically blah blah blah oh my god that markets don't give a fuck no they don't not at all i sit here and i'm like well this iota thing is bullshit markets are about short the fucking shit out of iota oh wait it's like number four i fucking can't after working in finance, you find that it all comes down to asset flows, like where the assets

are flowing. Into what securities. I mean, what's the common saying? The market will remain irrational longer than you can stay liquid. I found that out the hard way a few times. It's probably the only good thing Cain's ever said, was the market can remain illogical for longer

than you can remain liquid. Let's move on. Let's get a little interesting here. Are we going to get cosmic again? No, we're not going to get cosmic. We're going to talk about diets. I told you this before we started recording. We've got a sector of carnivores in Bitcoin.

And we've got a sector of vegans as well. And you fall under the vegan sector. I am a vegan. I fall in the middle. I'll eat everything. I'm an omnivore. I don't give a shit. I can eat a smoothie.

I could eat a steak. I could do whatever. Neither of those are vegan. Neither? A smoothie has milk in it. No. I mean, no. I'm talking about like apples, bananas, acai.

Oh, okay. I told you I don't drink dairy anymore. All right. All right. But I think it's funny the dichotomy of crazy diets. There's crypto-vegans and crypto-carnivores. but i think it's funny that like just the whole diet aspect has has trickled into the crypto space oh yeah cryptocurrency yeah there's there's who's the most it's probably zuko is the most famous

crypto carnivore right he's he's like i think he started the trend but i would say bitstein michael michael goldstein is probably the most and cypher dean are probably the most adamant at this point okay i could see that yeah i don't know i mean i um if i'm completely honest i i caught veganism and i um you caught veganism caught veganism veganism to most men is an std what the fuck no you went out with a girl yeah you go out with someone you go out with someone for a while and they're a vegetarian or vegan and so that's the only thing you eat and after a certain point you're like yeah this um when's the last time you had this this meat thing or this this dairy thing it's just not appetizing anymore uh so i went out with a vegetarian for

a while in college and almost was vegetarian then went over with a vegan for a while after college and then full-on cut the vegan STD. You would be surprised how many folks I know who cut veganism or vegetarian as an STD. Are you in it for the dietary aspect or the humanitarian aspect? Taste preference. Honestly, at this point, I just haven't had meat in, I don't know, three years, four years.

It is no longer appetizing. You don't have it for long enough, and you just kind of look at it and you're like i could eat the flesh of a dead animal or i could not do that and also i live in new york so i could just go get falafel and it's better and i fucking love falafel and hummus that's yeah i mean at a certain point if anything it's easier right because like i don't have to spend as much time trying to find a freaking restaurant to go to i can just be like ah vegan restaurants okay there we go it's just it is easier and it i would prefer to not eat a carcass of a dead animal or something that came

out of a cow's udder like whatever the fuck like i just you know why why would i eat that to each his own just does not appetize me it doesn't it doesn't make me excited about eating food and there's great fucking vegan food here in new york like there's a michelin star vegan restaurant here in new york which one all right sorry vegetarian restaurant uh nicks nicks is vegetarian what do you think of uh by chloe you like by chloe they're fast foodie too much sometimes i don't know which is by chloe's good but there's there's a Mediterranean like my go-to is falafel yeah Mediterranean there's a sucker for hummus falafel oh god who isn't there's a there's a um Um, what's it called?

There's a falafel place literally across the street from my apartment. It's like, I go home, they close at 10, so it, like, gets me out of the office at 9. I go home, get falafel on the way home. That's, like, ah, that's my dinner four nights a week. How many falafels do you eat? Hmm? How many, like, how many falafel pucks do you eat? Uh, I mean, whatever they put in a sandwich, I don't know, eight maybe?

Yeah, that's a stupid question. I don't know. Um, I've actually got pizza night at home. I gotta get home in like an hour. All right. Um, we're, we're warming up the stone oven, the, uh, the stone in the oven right now. This has been a fascinating conversation. I've got one more question for you.

All right. When is the blue hair coming back? When's the blue hair coming back? I don't know. I don't know. Uh, in SF it's like, you know, every third person has blue hair. Who gives a fuck? It's fun.

Did you live in San Fran? I lived in Zafran for three years, two and change. You are the blue mat. I was expecting you to come in with blue hair. I mean, I had blue hair for a long time. I did it in college the first time and then just had it for- Because you went to UNC or because you had an affinity to blue? No, it was fucking random.

I've been blue mat since middle school, actually. Really? I've been Blue Mads' middle school long before North Carolina. Oh, you grew up in North Carolina? I grew up in Charlotte, actually. I lived in Charleston, South Carolina for a little bit. Charleston, all right, all right. I'm a big fan of the Carolinas.

Yeah, I love the Carolinas insofar as they don't have interesting political decisions sometimes. Yeah, yeah, yeah. Whatever. I appreciate the landscape and the smells and the culture of being outside as much as possible. um charlotte charlotte's weird charlotte i grew up in charlotte right charlotte is um a island of not the south in the middle of the south you drive 20 minutes in any direction and you're in the fucking south charlotte itself you're not in the south it's weirdly like transplants from new york and whatever else um anyway so i did the blue hair i've been blue

meant forever i did the blue hair kind of independently a friend of mine did her hair and i did my hair at the same time we were just kind of like yeah whatever and then everyone kind of assumed it was unc blue because it happened to be the right color and i was like yeah okay whatever i'll stick with it and i stuck with it for a number of years living in san fran because whatever it's normal in san fran it's a bit less normal in new york i'm still trying to side if i'm gonna do it again i like both i like the blonde i'm a blonde hair guy kid myself i appreciate blondes when i see them it's uh i'm i am appreciating natural hair color yeah yeah no it's um we'll say i think uh i think it's a good look on you i think the blonde is a good look

blue is a good look as well but thanks not gonna force you anything um all right all right what advice do you have for our listeners to the freaks out there? A parting note. Let's keep in mind that most of the people listening to this are probably relatively new to Bitcoin and crypto. New to Bitcoin. I mean,

obviously don't invest more than you can afford to lose. We've been hit this a few times, done it like this. This is experimental. This stuff just, it might very well go to zero and by might very well i mean probabilistically it is most likely the stuff

goes to zero uh don't get too excited about markets the market goes up and down uh avoid playing into the emotion it is hard to look at a market and not get emotional and see it go up and want to buy until you go down and want to sell that's how you lose money um but enjoy getting carried away with learning in this space there's so much to learn about there are so many topics that bitcoin will lead you down a rabbit hole of so many different interesting things go down the rabbit hole enjoy it learn something new learn something exciting that you hadn't thought about that you've never considered as an issue in modern society get excited about it i couldn't agree more and i think that's like i've been saying recently i've reached my bitcoins in because i don't care

if it crashes or goes to millions of dollars because the amount i've learned and the people i've met and the experiences i've had are so worth yeah so worth it and again like this could potentially if it is successful it's not highly probable it's probable to a certain extent it's not highly probable it will usher in the next enlightenment and i'm happy that i'm alive now to go along for this ride um the ride's a hell of a lot of fun it's a it's a hell of a ride i think it has has has led to some hair loss i can't oh yeah i've got a bad genetic receding hairline have inherited from my family but i think the bitcoin ride is is expedited uh or expedited the uh the amount of hair loss i have right now totally worth it totally worth it um with that

being said matt where can we learn more about you where can we find you i'm at the blue matt on twitter i'm one of those weird people who reads all of my public dms so you're welcome to ping me ask me questions whatever i don't always respond uh but but occasionally i i find the time to respond go through my dms and then and respond to things uh i also contribute to bitcoin core and and hang out on on irc if you're really committed and you want to get into development irc is the place to be i don't think most of our listeners know probably not probably not with that being said that's all we got for this week freaks peace and love Cheers

Woo