TFTC: A Bitcoin Podcast - Tales from the Crypt: Pierre Rochard Pt. II

Episode Date: October 26, 2017

Join Marty and Pierre in Pt. II of Episode 2 as they continue their conversation about speculative attacks, Bitcoin v. Ethereum, this year's ICO mania, and quality v. quantity. Show notes: Grant Williams' interview with Kyle Bass: https://www.youtube.com/watch?v=4ZdtL1YrRYo Satoshi Nakamoto Institute: www.nakamotoinstitute.org Pierre Twitter: www.twitter.com/pierre_rochard Marty Twitter: www.twitter.com/MartyBent

What is up, freaks? Welcome back to Tales from the Crypt. It's your boy Marty here to intro you into part two of episode two, our conversation with Pierre Rochard, co-founder of the Satoshi Nakamoto Institute. If you haven't listened to part one yet, I recommend you go back, download it, listen to it, share it, review it, because if you don't, you're going to miss out on a big part of our conversation. and jumping into where we left off may seem a little confusing as we pick up in part two we left off with uh pierre describing hyper bitcoinization and speculative attacks this is

where we pick up and uh throughout part two we hit on a bunch of other topics including bitcoin versus Ethereum, the ICO mania we've experienced this year, and quality over quantity. In my opinion, this conversation is only getting more interesting as we get deeper into it. So I hope you guys enjoy. And again, if you do, subscribe, review, tell your friends, and let's spread the Bitcoin love. So again, enjoy part two, episode two, Tales from the Crypt. New U.S. dollars are created when someone goes and borrows from a bank, and that actually

causes the value of dollars to go down, and then the fact that you're taking those dollars and buying Bitcoins causes the value of Bitcoins to go up. And then, what do you do? You can sell a portion of your Bitcoins, pay off your loan, and boom. And boom, you're done. And that's been my investment thesis since the beginning. We're going to see a great rotation from fiat currencies. Not completely at first, but eventually over time, over hundreds of years.

But a rotation from these fickle currencies to a better monetary system, which is Bitcoin. I see it happening in decades. Decades? Yeah. So, because that cycle is a vicious cycle in the sense that when people see the price of Bitcoin going up, even if their currency is fantastic, even if they live in Switzerland and they have the best currency, they still see the price of Bitcoin going up in their local currency and it starts to set an expectation about the returns that you get from holding

Bitcoin. Basically, hyper-Bitcoinization is driven by what percentage of the population has an expectation of the price of Bitcoins going up. Once you get to a critical mass, then that expectation gets realized, and the local currency ceases to exist, and everyone's just using Bitcoins. Is this sort of like a debt jubilee, to some extent, too? Would you have to pay your debt back in Bitcoin? It is a debt jubilee in the sense that all debt contracts today are denominated in dollars. And so, if dollars are worth zero, then unless you're, I want to say stupid enough, but maybe honest enough to go renegotiate your debt into Bitcoin.

Stupid enough is the right term. Let's say stupid enough. Then, yeah, it's a debt jubilee. Your debt is worth zero to the lender, right? Because they lent out dollars. They expect it to be paid back dollars. You can pay them back dollars. They're just worthless.

So, yeah, it is a debt jubilee, and it will fundamentally reconfigure the wealth distribution. It's a huge wealth transfer. I'm heating up. I can feel the blood pressure of people that are hearing this argument and think Bitcoin's a Ponzi scheme, like freaking out. So, what, if anything, would stop? it's very possible what could stop this from happening here's what stops a speculative attack

from happening and this happened very recently folks 40 years ago 40 years ago most of you guys weren't born Bretton Woods there was inflation in the United States

we were under Jimmy Carter weak leadership As some would say, low energy. Hey, that man cured a disease from the whole earth. I'm going to give Jimmy Carter some slack. Let's not dwell on the negatives of Jimmy Carter. He's a good man. He was the president of the United States, and we do need to respect a former president

who has done a tremendous amount of philanthropy and good work. However, on the economy, there's some controversy. And so basically, Ronald Reagan got elected. I have more respect for Ronald Reagan than for Jimmy Carter, but that kind of betrays my political beliefs. uh and paul volcker who actually nowadays he's kind of seen as a liberal but uh honestly like i see him as uh just uh a mensch i i paul volcker's the best fed chairman to do it right he's the best that ever was so in that position paul volcker stopped a speculative attack in his tracks. Gold was skyrocketing. Inflation was at 20%. Things were basically looking like

the Fiat Bretton Woods system was flying off the rails. We were going to head towards a situation where the dollar was going to collapse. This is when he raised interest rates like 8%? Oh, 8%. That was the beginning. So, Paul Volcker engaged in money supply targeting. He said, so, you know, we got different measures of money supply. You got M1, you got M2. Yeah. The way I understand it, he raised interest rates because of the oil crisis, right? Or was it- Yeah. So, again, it goes back to what I was saying. Like, every time there's a narrative. Yeah. There's a narrative. Exactly. I'm not going to interrupt you anymore.

No, that's okay. Bottom line is, there was a commodities bull market, and there's oil due to the oil crisis, but there was gold and silver, too. His approach was saying, look, we're going to have X percentage growth in our money supply, and the interest rate will do whatever it does to get us there. The outcome was that interest rates went up to like 20%. Folks, 20%. This isn't the interest rate on your credit card. I get that today your interest rate on your credit card is 20%. This is the interest rate at which the The United States government borrows that, okay? So, today, that's at, like, 0%.

Today, you're talking single digits, low single digits. What is it, 75 bps right now? Yeah. Is that what the Fed rate's at? The Fed funds rate? Yeah. They're tightening. Back then, 20%, okay?

Could you imagine doing that today? Oh, no. It's impossible. The thing, the whole, it would just, yeah, gone. I mean, look, the 2008 financial crisis was caused by Bernanke raising the interest rate from, like, 2% to 6% or something, you know. And that's the predicament we're finding ourselves in right now. And that's what I think with neo-Keynesianism, Keynesianism, now neo-Keynesianism. You back yourself into so far of a corner, and that's sort of why I left the Futures.

I was like, these guys don't have any tools left. They can't do anything. You can't, unless they go to the negative rates, which we get into a point where, alright, is this monetary system even worth it? O' There's that, or they start buying stocks, and you see that in Japan. Don't start talking about the plunge team here. O' Oh, yeah. Plunge protection team over here. Yeah, so, Paul Volcker, by raising interest rates, or by letting interest rates float and targeting the money supply, he was

able to stop a speculative attack from happening against the United States dollar, and that was in 1980-81. Today, if the government wanted to stop a speculative attack against their fiat currency by Bitcoin, the interest rate they would have to go to would be unconscionable. You're talking triple digits. The reason is, contrary to popular belief, when the price of gold goes up, more gold gets produced, because gold miners will produce as much gold as they can at the cost that is profitable to them. If the price is going up, that means that they can increase their costs and they can go out and mine more gold. You don't have that with Bitcoin. Because every two weeks, the difficulty gets retargeted. That means

that if you've got more miners coming into Bitcoin and they're trying to get their Bitcoins, every two weeks the game gets harder. Bitcoin mining is one of the most vicious markets out there. It is. It's one of the purest markets in the world. Bitcoin in general is one of the purest markets in the world. Mining specifically, when you get down to it, it's literally open source software. If you have the hardware, you can download the software onto your hardware and start running it. Everyone knows the algorithm. It's SHA-256 squared. Anyone can do it anywhere in the world, and the Chinese are proving it. That means that it readjusts every two weeks so that

only a specific amount of Bitcoins are created on average every 10 minutes. And that means that the government would have to be hyper-aggressive in trying to stop a speculative attack because there's no release valve on the supply side on Bitcoin's side. So let's get into attack scenarios here. Do you think a government or a coalition of governments will ever attempt to 51% attack Bitcoin? Right now, it costs about $31 billion.

Yeah, this goes back to the block size debate and nodes versus miners. And that, at the end of the day, if someone wants to take their mining hardware and fork themselves out of consensus, more power to them. We will find other miners. There is a global market. And, you know, I think that we're, like, a couple of decades away from having a, like, having miners outside of Earth, okay? I'm serious. Like, satellites mining. All right, let's go for it.

Let's go for, like, trippy sci-fi Bitcoin theories, like, things that our grandchildren will benefit from. Yes. And there's good reason to believe that Bitcoin is good intergalactic money as well. Oh, yeah. Because of the blockchain and because you can sync up with it. The theory is that most Bitcoin mining is going to be done on mercury. Why is this? Closest to the sun.

Makes sense. Use solar power. And it actually, it doesn't really matter. How fast is that propagation? from it actually so yeah let's say that doesn't that only matters up to an extent and yeah so I think I think it was Peter Todd who was putting forward this this theory and I'm sympathetic to it um eventually you get to Dyson spheres now okay okay you just what yeah what what are Dyson spheres okay so you

know I'm talking about like mercury it's like a tiny little planet floating around the sun? I saw something about ice caps on Mercury. We won't get into that. That's interesting. That interests the hell out of me. Ice on Mercury? It seems a little interesting. So, yeah, you've got a little dot around the sun. What if you wrapped the entire sun

with solar panels? And so the sun, all of, everything coming out of the sun is going into these solar panels into this sphere around the sun. And it's all mining Bitcoins. And so you've basically just captured the entire sun's output.

Well, wouldn't that be redundant because you'd kill yourself in the process? Yeah. So, folks, we're going to have to go, not just in the solar system, we've got to go find a different sun to do this to, okay? Let's not kill the goose that lays the golden eggs here. All right. So, we just don't sound like a couple of quacks. Yeah.

Let's talk about how this process would play out. We got super quacky. How would this play out, like, from us having mining cartels, basically, in China to being able to mine in space? What needs, like, what is the timeline? What needs to happen between now and that's possible? Elon Musk needs to keep on hustling. Oh, my God, I love that, dude. I don't understand people that hate on him.

Like, finance world in particular, like, stock pickers that hate on Tesla. It's like, this man's trying to take us to Mars. Yeah, and I feel the same way about Jeff Bezos. Again, my mother-in-law, she's like, hey, you've got to support local businesses. You can't be ordering everything off Amazon. I'm like, look, every dollar I spend on Amazon, a fraction of a penny is going towards Jeff Bezos' space program. I'm helping support the human race, not just your local community. You're doing more buying stuff on Amazon than you are paying taxes, because the government isn't giving any money to NASA.

Are you kidding me? Yeah. No, the government's just paying for someone's type 2 diabetes treatment. They're not ... Yeah. Eat a steak, people. Oh, God damn, eat a steak. Yeah, so I think that with these private companies that are really ... They're reusing rockets. Being able to travel from one point on the earth to another point on the Earth in less than an hour. We're talking like New York to Tokyo, not New York to Boston. New York to Tokyo in 30 minutes because you're going on a goddamn rocket.

So I think that the more that space commercializes, and so the problem with going into space is that it's expensive to put heavy material into space, right? So to put all your ASIC mining data center in space. And then I don't know the physics of the cooling. I imagine it's really cold up there. You go on the dark side of the moon, maybe. See you on the dark side of the moon.

Yeah. So, yeah, we'll have space mining for sure. But the other thing, too, is that governments are diverse. There's a lot of diversity in governments. You've got, on one hand, governments that are very responsive to their people. that are interested in improving the lives of their citizens. On the other hand, you have totalitarian shitholes like North Korea. It's totally reasonable to expect the totalitarian shitholes to ban Bitcoin, to mine Bitcoin for illicit purposes, or to try to undermine

the network or whatever. Then there are going to be governments that let private Bitcoin miners do their thing as long as they pay their property taxes, which is reasonable. It goes back to Satoshi saying, honest nodes make the network. If you have a dishonest node in a totalitarian society, the rest of the world will continue mining blocks and completely disregard the bullshit coming out of your node. There's just no reason for us to give any sort of credence to someone who's just putting out invalid transactions, invalid blocks, mining nonsense. That, to me, is the beauty of network governance, is that on every level, everyone is sovereign and no one is sovereign.

that that's a great way to put it it's the schroedner's schroedner's box of uh of sovereignty it didn't i don't know if that was a good analogy but whatever it works it works and and that's what like i want to say it pisses me off about like ethereum and all these altcoins are like and fucking professor bitcoin is all like governance governance governance it's like governance is an emergent property from the system right it just is right is just what we agree on at a certain point in time right there's no you're not going to vote for anybody to lead you towards governance it's just something that everybody comes to individually that's what the whole concept is it's a person-to-person network individuals have to make individual

decisions. And basically, the consensus of those decisions is what Bitcoin is at the end of the day. And that is the governance. Yeah, absolutely. I think what trips people up is that if you don't understand Bitcoin on a technical level, it's very hard to make governance decisions for yourself. At the end of the day, you kind of have to outsource it on some level to someone that you trust that they have the technical knowledge to evaluate these different governance trade-offs and then run their software. That's kind of like, that's the litmus test. What software are you running? And that is kind of like one of the controversies is, who in Bitcoin do we trust? Me personally. And I'm not saying that because I've made this decision that, well, first of all,

it's not set in stone, right? Tomorrow I could change my mind. And second of all, I don't think that everyone should make the same decision. They should evaluate the facts on their merit. But the current team that is maintaining Bitcoin that we call Bitcoin Core is the most competent set of developers who have a keen understanding of the trade-offs involved in Bitcoin's governance. And I run their software all day, every day. And I'm going to give a little pushback to you here. Do it.

Semantics, core is not a team. It's a process. It is a process of how you get code implemented into the Bitcoin implementation that decides consensus right now. So it's not a team in the sense of you core, you knock on core's door and you say, hey, I want to try out for the team. And they're like, you're on it.

Anybody, me, you are doing this right now. You are writing code and running it through course process. And if your code is good enough to get accepted via peer review, it will be accepted. So course process. Nobody is giving you permission to do pull requests and stuff like that. Right. Yeah. So there's a concept, agency.

Agency. You can – it's synonymous almost with initiative, personal, individual initiative. Core exists the same way that the Bitcoin network exists in the sense of it's a meeting of the minds. And you have a group of individuals who happen to – their minds happen to meet at a certain point. And it is the Bitcoin repository, folks. this is a vocabulary word here, repository, which is where all of the source code that determines what the Bitcoin software, the main Bitcoin software is on a website called GitHub.com, their minds meet there.

And they have a very thorough process of peer review for any code that goes into the Bitcoin software. there. Not only is there peer review, but there's also a thorough set of tests. This is very important in software development. It's kind of hard for folks outside of software development to understand. Software is inherently unreliable. Everyone has come across a bug in their software. It's universal. You get the fail whale on Twitter. If you're in an interview and say you've written bug-free software, you're a liar. You're such a goddamn liar.

Turn in your software developer card. If you're a junior dev trying to push this off, that's not a selling point. All code's going to have bugs. Yeah. I mean, if someone in an interview told me that they only write bug-free software, I would tell them to get the fuck out. That's an outrageous statement. That's like being a professional football player and saying that every play you execute, not only flawlessly, but you score a touchdown. It's impossible.

You score a touchdown with every play. Come on. So in football, your adversary is the other team. In programming, the adversary is the computer. And the computer is relentlessly logical. It does exactly what you tell it to do. and quite often you don't know what you're telling it to do. And so it's a tricky, tricky business.

So that means that you have to have a thorough set of tests to make sure that the software is doing what you think it is doing. It'll have a mind of its own because humans are not logical. Computers are logical. And so how do you get those to get together? So, the Bitcoin software project is, from what I've seen and from the software I've been exposed, kind of the gold standard in the rigor of its development process and the quality of the code that's being written today. Now, granted, programming, it's never finished.

You're always fixing something. And so Satoshi, you know, some say he was a genius. Some say he was a terrible programmer. Truth is somewhere in the middle, maybe, probably. Definitely a genius of its own. I've written trash software. I'll admit it right here, right now, folks out there. I've written trash software.

it's very easy to write trash software. What's hard is when other people look at your software and start wanting to make improvements to it. That's where your code needs to be moved around a lot. By no means was what Satoshi created perfect. The team that has developed around the Bitcoin repository has been putting out a tremendous amount of effort to improve, modernize his code. And that's why I choose to run it. And when people talk about running a node, that's the software they're talking about. There are other implementations of Bitcoin. They're written in other programming languages by other teams. But from my understanding is that from a reliability point of view, and actually, it's not just reliability. We're talking about

consensus. And I was talking about a meeting of the minds. But let's not kid ourselves. This network is not about lawyers agreeing on something. It's about software sending messages to other software and them agreeing that those messages are valid. If you run a different implementation of Bitcoin, you run the risk of your software being incompatible with the network. And that can easily happen. it's happened many times and in fact it's happened between different versions of the Bitcoin core software oh really yeah so one of the big things was March 2013 oh you got it man I was gonna try to remember when in 2013 that was yeah

it was the the accidental hard work yeah yeah it was a rule that nobody caught right yeah so they were up they were changing the database used by Bitcoin core and uh yeah so it broke consensus it caused a hard fork and people had to roll back their their because so what happened is people updated their software and then this bug became apparent and the hard fork happened and then they rolled back and you know de-upgraded their software back to the old version and didn't have to be within like 100 blocks because It's a reward of an incompatible chain that was ... Yeah, right.

I mean ... Was that like the 87 million Bitcoin? I think that was different. That was different? That was earlier. Yeah. That was much earlier. This was with Gavin, yeah, in 2013.

Okay. I think what you're talking about was when Satoshi was still around, maybe in 11 or 12. Yeah. No, because he left at the end of 10. Oh, okay. It would have been like 2009, 2010. See, this is one of my biggest weaknesses.

I got into Bitcoin at the end of 2012, beginning of 2013. And frankly, I don't really know the history of Bitcoin before that time period. It's embarrassing. I learned a lot about it for the first two episodes. And it is interesting. It is interesting because it was so fragile in the beginning. And it could have been taken behind the barn and put out of its misery. Because the government wanted to shut it down in the first three years.

That was their golden opportunity. And they missed it. It survived. And now we're here. We're at $100 billion market. We're at $6,000. This is a pattern, though, in Bitcoin. People don't take it seriously until it's too late.

That's true. I don't think it's too late, though. So, you still have time to take it seriously. Oh, no. I mean, like, well, right. But, I mean, too late in the sense of, look, I took it seriously in 2013. I knew about it in 2011. Yeah, true.

I mean, it's too late from the perspective of me becoming a big whale hodler. But for governments and for finance people, they're so set in their ways and in their Keynesian mindset, in their big government mindset, that they're inherently skeptical of Bitcoin, and it's to their detriment because Bitcoin's going to wipe them out. i 100 agree and that's something that i'm again what i'm trying to do with the podcast with the newsletter with everything is try to create like a new base layer of knowledge that people can work from because right like again people are falling into this cycle having to come full circle yeah bitcoin all coin hey maybe it's inevitable maybe there's just no it it might be

it might be um as with anything you need you need to have experience to to have some wisdom um i I think what brings people back in is the price. Always the price. And that's what – look, I'll be blunt. Part of what sold me on Bitcoin at the beginning of 2013 was one of my friends, George. George, if you're listening, what's up? What's up, George? You know, he just dropped casually like, yeah, this is going to make us enormously wealthy.

like owning these bitcoins is just like we're gonna if if we're right about the economics on this which we're very confident about we're gonna become tremendously wealthy on this and that like like the the that that kind of makes the animal spirits go let's get into this a little bit yeah i'm all about getting rich yeah i too believe that we're going to get rich from this but i'm more interested with the revolutionary aspect of it of of the taking back your personal sovereignty And Jamison Lopp had a great tweet today. Does he have a great tweet every day? He has a great tweet every tweet, I think.

I think so. I don't want to misquote him. Let's not misquote him. But he said, let me pull it up right here. And Jamison Lopp, for those of you who don't know, he works at BitGo. He's one of their lead devs, and he was actually swatted a couple days ago. Man, that is just completely unacceptable. It really is.

Folks, I know we're talking about money, we're talking about serious issues, but let's not forget that all of this is secondary to life itself. I hate to get serious, but... No, no, no. This needs to be reminded. Everybody needs to be reminded of this. And swatting is kind of a life-threatening situation, and law enforcement is trying to do the right thing, obviously. They're being told that someone's being held hostage and they're intervening in that kind of situation and they are ready to neutralize the threat. And so it needs to be taken seriously and I hope that person is caught. Yeah. And it's especially sketchy with somebody like Jameson who's like a known gun advocate and definitely has a lot of guns in his house.

So you're sending pen up law enforcement to his place where they might take something the wrong way. were. You're a scumbag if you're swatting people. Don't swat me. If you do swat me. Bro, don't swat me. Bro, don't swat me. Don't swat me, bro. Actually, do swat me. I need the Twitter followers. But, found Jameson's tweet, and this hit close to home with me, or this is exactly why I'm in it. The fight for the future of Bitcoin isn't small blockers versus big blockers. It's a struggle against apathy, sliding us into authoritarianism. Authoritarianism.

Authoritarianism. Yeah. Yeah. So, the first post I wrote about Bitcoin specifically was, end the Fed, hoard Bitcoins. So, why do I want to end the Fed? Part of it is, again, the monetary policy, the booms and busts. The other aspect of it is kind of a justice aspect of it, which is that the Fed enables, and any central bank, enables the government to spend money in a way that not only is it wasteful, but quite often actively harmful. And I would argue very strongly that, for example, the war in Iraq was a wasteful and extremely destructive waste of spending of money.

I don't think anybody's going to disagree with you at this point about that. Right. And, you know, it was, yeah. So you're 28, right? 28, correct. 28. I'm 26. You were a late 80s child, early 90s child. Yeah, 89. So for us, you were 12 during 9-11.

I was 10 during 9-11. Yeah. And I think this is why we're drawn to Bitcoin very, very strongly. Me personally, I know, is because I remember 9-11 very vividly. I was in fifth grade. And everything that's happened since then, like retrospectively looking back 16 years out, it's like, ah. Why did we do that? Exactly.

Why did we do that? Did we act in haste? Was it the best decision? and rolling that experience into the financial crisis of 2007, 2008. It's like, all right, what the hell is going on in this system? Does it have our best interests at heart at the end of the day? And is there something better out there? And I think that's what really drew me to Bitcoin is because it is the Buck Fullerman.

Yeah, yeah, yeah. You guys all know this quote. You're not going to change an existing system from inside. You've got to build your own system outside of that system. And that's what Bitcoin is, is that opportunity to start from scratch and build a new system that's more fair, more equitable to a sense, and something that just makes more sense to me as somebody that has lived through the years following 9-11, the financial crisis, and basically America through the early 90s to today. Right, because at the end of the day, if a government can print its own money, it reduces the amount of accountability it has towards the taxpayers.

And that's why we get into crazy situations like Iraq. It's why we have the government being extremely wasteful with the money that we give it. It's because there's zero accountability. uh and you know we we do have an electoral system where we elect like assholes every four years and uh it never changes south park said it best yeah you're you're voting between an asshole and a turd sandwich a douchebag sandwich that's exactly the options we have uh so at some point we have to have the option to withhold our wealth from them and tell them, look, if you're not going to spend this with ... I'm not asking you to not make any mistakes.

Look, I get it. I make mistakes at work. Everyone makes mistakes. But at least give it some thought. And don't lie to us about WMDs. Don't give us some horse shit. I agree with you, too. With the chemical weapons in Syria.

And again, it comes back to tax dollars and the leverage on violence that the government has because they have that unfettered ability to take money from you in the form of taxes. And this is probably behind Satoshi's white paper, one of the gospels of the Bitcoin world is the sovereign individual. And that is what they get into. Like, if you guys haven't read this, if you freaks haven't read this book yet, The Sovereign Individual was written in 1997, originally republished in 1999 by two British economists. And they predicted a lot of what's happening today. Yeah, they did. Bitcoin specifically on page 25, I know exactly what page it is, and they talk exactly about what you just described, is now with this person-to-person value transfer system in Bitcoin, we have something where we can withhold money from governments when they come to collect taxes and say, hey, if you want my money, you're going to have to bargain with me. And unless you want my money, you're either going to have to extract my brain wallet from my mind, or you're going to have to make a good case for me to give you your money.

Right. It changes the cost of exercising power. Exactly. The logic of violence. That's what they talk about. The logic of violence. That's exactly right. And that's what they focus on in the sovereign individuals.

That's why I was talking about 500-year super cycles earlier. is they focus on sort of these inflection points that are predicated on technology, innovation. And we just so happen to be born during one of those inflection points with the internet and Bitcoin. And that's the point I'm trying to get across mainly in the newsletter.

I don't know if you can get this vibe. It's like, let's recognize where we are in the context of history, people. Like, things are so weird right now. They've never been this weird and they're only going to get weirder. And we just have to recognize that we were born at one of the weirdest times in history.

Yeah, let's take stock of how weird it is. Donald J. Trump is our president. That's all you have to say. Donald fucking Trump is our president. And this is something that the sovereign individual predicted. They didn't say word for word, Donald Trump is going to be president, but they said they laid out the conditions

that would lead to Trump. We'd have massive job loss due to automation. we'd have nationalistic tendencies of people blaming immigrants yeah uh a strong nationalist movement for very polarized political opinions right and that's exactly what we're in donald trump is our fucking president well it didn't the simpsons joke about oh trump being elected i think i think snopes might have uh debunked that snopes killing my buzz snopes is probably We're hitting the slopes right now with a couple hookers somewhere. Snopes, killing my buzz so you can get your buzz.

Unbelievable. So, you know, let's, yeah, we got into the politics. That's important. But I think that we got to look also at the Bitcoin politics. We're talking about the macro politics. We're talking about the big politics. And frankly, nowadays, I don't pay attention to what's going on with the latest health care bill. Oh, my God.

I don't look at what's going on with tax reform. I look at what's going on in Bitcoin. And I see so many different moving parts. And it's often hard to just even keep up with the new ideas. You've got buzzwords going around, like MAST, Lightning Network. MAST, Schnorr, Schnorr signatures, all that stuff. And that's probably what helps people come full circle, too, is because you get so inundated with all these new ideas and projects.

If you start delving into altcoins, me personally, I'm like, oh, Jesus fucking God, I need to focus on Bitcoin specifically before I start branching out to other things. I told someone on Twitter, I was like, look, I can barely keep up with Bitcoin. What do you expect me to get into all these altcoins and stay up to speed on all their little tweaks and innovations? And so you freaked out to DM me, asking me about random ICOs and altcoins. Nine out of ten times, I'd never heard of them. Like, I'm not doing, like, there's enough to follow in Bitcoin, and I got burnt enough in all coins in that space to realize that the real talent is working on Bitcoin, that I don't even worry about that anymore.

Do you remember in 2014 when ZetaCoin was going to save Africa? Well, there was AuroraCoin that was going to take over Iceland. They had ArchCoin. They were going to build a bunch of floating houses that people were going to buy. Do you remember that one? The architect, right? Yeah, yeah, Bitcoin architect. He was going to take people, I think it was somewhere in the Nordic, one of the Nordic countries.

He had really good CGI graphics. He did. It was appealing. A good marketing piece. I didn't send them a Satoshi, but I was taken by the idea. Maybe we'll still do that eventually. We'll see. Maybe we'll have to with all this ocean water rising.

Yes. New York City is going to be Venice. I'm giving it like 20, 30 years. It's a heavy subject, man. It's heavy for me personally because I have a very intimate relationship with the island town in South Jersey. I know it sounds crazy. It's down the shore. I'm out in Rockaway.

Yeah, it's a barrier island. They've been dredging the shores every year now, adding more sand to it. But you can only do that for so long before the ocean gets too high. But we're about two hours into this conversation. I don't know how much time left you have. How much time left do you have? We can keep going. Let's keep going.

Because I'm going to basically cut it up and get the best parts of the conversation. Fantastic. We're not going to get any Marty Math in here. This is for... Are we getting the pegging? We'll get the pegging. We'll keep the pegging in. I'm going to get fired for that one.

Okay. You're fine. Nobody's listening to this podcast. Yeah, I guess I want to delve further into Ethereum versus Bitcoin with you. One thing I want to talk about specifically that I don't know if you can explain for me and help me better understand, but with Ethereum, when it comes down to, is they're moving towards a centralized system with how big their blockchain is. It's what, at 300 gigs right now?

Yeah. At least? I don't know about 300 gigs. I don't know about 300 gigs, because I think it actually recently exceeded Bitcoin. Bitcoin's at like 150. Right. I thought it was double Bitcoin. Well, I mean, it's exponential.

Yeah. Well, exactly. Yeah. So, their counter-argument to that is- Pruning. Thank you. Yes. Pruning.

So, you know, okay. That's fine. Because, I mean, they are pretending to be decentralized. Sure. Okay. That's fine. You can do a hard fork in a week. Okay.

Yeah, they had an emergency fix the day they were hard forking to Byzantium or whatever they're calling it. They've got cool names. I'll give them that. They come up with cool names. It goes back to the market. It goes back to the market. Hey, folks. Constantinople, Byzantium. If your hard forks have a cool name, consider the possibility you're getting scammed. I think that fundamentally, Ethereum's problem, contrasted with Bitcoin's, is ... I was saying, Bitcoin is a social consensus. It's a network where we have people who fundamentally have

agreed to the rules set out by Satoshi, especially with regards to the monetary policy. You don't don't really have that in Ethereum. In Ethereum, they do have a monetary policy. It is, in some sense, similar to Bitcoins in that it is targeting a certain number of ethers at some point in the future. But it is not, from what I understand, part of the social consensus in the Ethereum community. They are very open to changing that monetary policy at the drop of a hat, if circumstances are requiring that. We saw a preview of that with the DAO. I don't know if your audience is familiar with the DAO. You guys probably are too familiar with it. The DAO, the Decentralized Autonomous

organization um basically it was the first ico no not the first auger was probably the first right depends how you define ico but ethereum was an ico itself yeah um but it was one of the first icos on ethereum it was last year right june of last year um and lo and behold the smart contract scripting language am i saying this correctly solidity yeah yeah solidity is a scripting language right right uh apparently it's not too easy to write smart contracts in it and that's a euphemism not too easy not too easy it's extremely it's extremely difficult they're building tools to make it easier but the fact that they need to build tools to make it easier will tell you something about how hard it is and this has been my theory on ethereum the whole

time too is Gal's Law. A system that starts out based in complexity and tries to scale from there is doomed from the beginning. I would argue that Ethereum started out too complex. Ethereum's a great ... Well, let's let the history books write the history, but I think that it will be recognized as being a great example of bad software engineering. of the key principles. This goes back to our discussion about Linux. The word Linux is a play on the creator of Linux, Linus Torvalds, and the operating system that preceded it called Unix. We were talking about the cypherpunks and the history of Bitcoin and how it's got

a long history. Well, Linux has a long history, too. If you go back and look at what the Unix philosophy is, one tenet, and I'd argue the most important tenet of it, is write software that does one thing well. Don't write a Swiss Army knife. If you start writing a Swiss Army knife the complexity is such that uh it's it's not going to cut anything it's not going to scissor anything it's not going to toothpick anything it's just going to be garbage uh you know would you consider a touring complete world computer that can make smart contracts the swiss army knife possibly i would argue i would put forward some would say that this is a controversial statement But, I would argue that creating a world computer Turing-complete language is creating a Swiss

Army knife in the worst way possible. Bitcoin is doing one thing and doing it well, that is, it is peer-to-peer electronic cash. Peer-to-peer electronic cash. It is a payments network that has its own self-contained currency, and that's what it is. And so, you know, people are trying to graft other things onto it. That's fine. Sure, knock yourself out. But Ethereum is trying to do it all. It's trying to get your medical records on the blockchain. It's trying to get insurance on the blockchain. It's trying to get derivatives on the blockchain. It's trying to get equity trading on the blockchain, I think that is a fool's errand. The system is going to collapse on itself, both from the difficulty of doing anything on it, and

then it's going to collapse due to its success. We're actually seeing that with the ICOs. The more it succeeds at all these different use cases, the more bloated it gets, and the riskier it gets. The DAO raised $100 million, was it? I forgot. I think, yes, they raised $100 million. I think they got ganked of like $50 million. Right.

They might have raised like $120 million. $120 million, yeah, that sounds right. The premise of the DAO was that it was going to be, basically, if you think about a partnership, everyone puts in their money, and then the partnership decides on what to invest in. The twist was that the decision was already made. They were going to invest in this company called Slockit. What was Slockit going to make? Slockit had locks. That way they were going to use a blockchain to unlock your bike in your house oh god you couldn't make up a douche your ceo to steven the tool tool yeah

i mean he's a tool yeah that's great and so again to go back to like yeah the whole concept gaul's law starting from complexity like so the dow for those of you that don't know it got hacked yeah it was a huge contention that the dow was the reason we have ethereum and ethereum classic because they eventually had a hard fork they wound up giving they basically giving creating another chain where everybody got their money back and the dal hacker got screwed but there he actually didn't get through because he's got no actually never mind but he's got some ethereum class he's got some ethereum classic um presentably i don't know which isn't a great asset to hold either but that's another conversation

yeah but you have a prime example like off the bat this was a project that was endorsed by gavin wood it was endorsed by vitalik buterin it was it was uh well when you say endorsed do you mean literally endorsed i'm pretty yes like i think i think they did a code audit like yeah of the code right and said yeah they blessed it yeah they blessed it put it out in the market and there's a there's a leak in the the smart contract like it's hackable and right there Like that is, this is not how this is supposed to work. And it's interesting how far it's gotten. It's gotten very far.

Like we were just talking about Taser this earlier. The DAO got hacked and they reversed the hack. And this gets back to like the social consensus. Is that the social consensus was that it is acceptable for us to take money away from this hacker because our belief is that it was unlawfully gained. Code is law, though. Right. Their argument before the Dow was that, hey, whatever the code does is what the code does.

And we're not going to go reverse things just because something didn't turn out the way you were expecting to. And that got turned on its head when the wrong people lost money. and because Ethereum is a centralized system that pretends to be decentralized, it was trivial for them to reverse it and to create a new consensus. And that's why I think that the monetary policy of Ethereum is not set in stone because at the drop of a hat, if they decide that it is in their best interest, this centralized group of developers of Ethereum, to have a different monetary policy

that they will follow through and have a different monetary policy. And, you know, there's memes in Bitcoin. There's HODL. There's shitcoin. There's also- To the moon. To the moon.

Let's remember this one. Sorry for your loss. SFYL. You'll see it abbreviated. SFYL, baby. Sorry for your loss. And that's whenever you get your ass scammed you get duped

you get hacked it's happened to me twice and the money is gone sorry for your loss hey ISFY held hard you know what

you just gotta eat those lumps and keep trucking but learn even yes learn from learn from experience

and that is that happened to me like again I got I got fucking murked on MintPal in 2014 that alt exchange

I got everything taken from my account but But that's a story for another day. Going back to Ethereum, the way they argue decentralization confuses the hell out of me. Because they go with pruning, sharding, SPV nodes, like all that. SPV nodes don't need to hold the whole state of the blockchain or whatever they're saying. And so going back to the amount of gigabytes on the blockchain,

I don't know what Ethereum is at now. It's more than Bitcoin at this point. It's five years younger than Bitcoin, and it already has more data than Bitcoin. And they're arguing that, hey, pruning, sharding is going to solve all of this. But at the end of the day, you still need those full nodes with the full state. And at some point, there's going to be terabytes of data on this blockchain, and there's going to be a necessary full node. And you're going to get to a point where there's only a few full nodes in the world. And that is a huge attack vector in my mind.

Am I stating this correctly? You are stating it correctly, but I think that you're actually being a little too charitable towards Ethereum. I think that they're already at the point where there's just a few full nodes that actually matter, that actually determine the consensus in Ethereum. And so, you know, in Bitcoin, I was saying that there's like a dozen nodes that are mining, but there are thousands of non-mining nodes. 7,000 core nodes, I think I saw today. just just keeping the miners honest and so if you just have a few nodes and there's no there's no check on their power uh then you can't keep them honest they're going to reverse your transactions whether it's the dow or you know uh vitalik sends his bitcoin or his ethers to the

wrong address or whatever it may be in the future or they're just like you know what the ethereum Foundation does not have enough resources to fund development, so we have to issue more ethers, and they're going into our wallet. Really, that's what's going to end up happening in my mind. When you have centralized power like that, which they do have, it's very hard to not just become the Fed and give yourself money. I don't blame them. It's human. It is human, and that's how Ethereum started. They started with an ICO with a pre-mine that was that had a development fund built in and uh it's yeah when i'm trying like again i was talking about a higher base layer of knowledge like i want to prevent greater fools in this market in

particular because i think it's holding the space as a whole back but at the same time it's not a failed project uh yeah so and i have i have i have good friends smart friends very good friends actually, who I'm interviewing next week, is a big ETH bull, but I have not been convinced yet. I have not been convinced that it's viable. Yeah, I mean, I think that it's ... I certainly was taken aback by the success it had this year in the marketplace. Yeah, you had Vlad Zamfir, the head researcher of Ethereum, in February when the price was at eight dollars or twenty dollars i think saying everybody should not be buying this

this is untested code uh that that was a bad market call on his part yeah oh it's at 300 today i think something yeah it got up to 400 at one point but you still that's good and you can talk about dumb money rushing in but back to the point like he's the lead researcher of the ethereum project and he's saying this is unstable technology that you should not be throwing money Let's talk about the dumb money. My view is that Ethers has gone up in value due to the fact that people want to buy ICOs. So, the way you buy ICOs is that you buy Ethers and then you buy the ICO. Some of them are in Bitcoin. Yeah, you can buy into ICOs with Bitcoin, but most are launched off of Ethereum because

they made it so easy. Right, because they have this thing called ERC-20 tokens. Just come to the meet, go to the Austin, Texas Ethereum meetup. They'll teach you how to spin up an ICO with an ERC-20 token. Just make sure you come with a good marketing plan. There you go. Lots of folks seeing fantastic marketing plans on LinkedIn or on the ICO website, and they're like, oh, you know what? I need to get in on this. They go and they buy Ethereum,

so that makes the price go up, and then they send their Ethers to this project. The project treasurer, whoever that is, very wealthy man, because he can just walk away with that money at that point. They sit on those ethers until they need to spend them. As they spend them, it unwinds the initial process of people going into ethers, because basically, they got to go sell the ethers for bitcoins or for dollars or euros or whatever they need to fund the development or buy a Lambo or whatever they were going to do because you just donated money to them. That, to me, is what is going to cause the price of ethers to go down. In economics it's called capital flight. An economy, they'll have equities and bonds and whatnot,

and so when people sell those, and they sell the local currency to just get out of the the economy entirely, because they were foreign investors, which describes everyone in Ethereum. Everyone's a foreign investor. No one is born in Etherland. That means that we're going to see capital flight out of Ethereum. I think we already are, in terms of Bitcoin. If you look at it in terms of Bitcoin ... There could be another wave, right? There could be another wave of ICOs that captures the imaginations of people. I think that we've tapped out the dumb money. I think we have as well, too, because Tezos this week being a great example.

I mean, I think Banker was the biggest, and then Tezos, or maybe it was another. Tezos is top three. I'm pretty positive, I can say. Yeah. In amount raised via SEO. It might be number one. It might be number one. But that is a perfect example of, oh, shit, we just threw our money at something.

What's her name? Catherine? katherine breitman yes she came out in that kathleen kathleen she came out in that reuters article and was like oh uh yeah the people that bought tezos that bought tessies they they fully understand that they basically bought tote bags yeah right like yeah you know my favorite quote from that is uh tim draper so he oh my god he gave them a million bucks and the reporter emails, how much did you donate to Tezos? And he replies, you mean, buy?

I bought a lot. Mr. Draper, you got to read the fine print. Tim Draper, sorry for your loss. You should have just huddled that 30,000 Bitcoin you bought from the Silk Road. Just sit on it. You donated. You made a donation.

And I tweeted out that he's a philanthropist. He reminds me of Warren Buffett. He's a good guy, Tim. He's a good guy. So, let's get into it. So, why are we wrong? Why would we be wrong in this argument? How are we wrong, if we are?

Let's play that. Yeah, let's play that. So, basically, that these ICOs are able to execute and create value. and that they take the capital that they have been allocated, and they go out and deploy it, and due to their savvy and their hard work, they are able to produce products for the marketplace that ultimately create value and generate cash flows, and thus, investors in those ICOs see a return that matches their expectations and they go in and reinvest

and the Ethereum ecosystem as a whole grows much faster than Bitcoin. And you find that very hard. You do not see that playing out. So what I just described is quite possibly one of the most difficult things to accomplish in the world which is successful entrepreneurship successful entrepreneurship is insanely hard and the

the um the paradox is that the more money you raise the harder it is the harder it is because first of all you've got bigger expectations from more people and you have less motivation because you have no strings attached fuck you money a quarter billion of the dollar quarter billion of dollar walk away with marty's drunk and yeah marty math uh you can walk away with that money why why waste your time trying to program some bullshit that frankly Also, let's not forget the third point, which is that programming these distributed applications that these ICOs are promising is several orders of magnitude harder than programming a centralized application, which, let's not forget, is extremely difficult on its own merit. So, what would you say to the people that point at what some would argue is a vanity metric of the amount of developers that are working on Ethereum as opposed to Bitcoin? um that's that's what a lot of people pump in ethereum is the developer community is so

enthralled they're so passionate and so they have the manpower right and the passion to to will ethereum into that's fair um i i uh so ethereum specifically has targeted uh creating kind of a developer-friendly environment in the sense that the programming languages that they use, so they have Serpent, which is Python, which I think, I don't remember. They abandoned one of them or something. And then you have a JavaScript version.

And so those are easy on-ramps for developers. The thing is, though, is that it's very easy to throw code together. I was talking earlier, I've written a lot of shit code. The hard part is polishing it into production-worthy code and making it so that not only does this code work under normal circumstances, but it works under abnormal circumstances and when you're not expecting things that you're not expecting. And so as we saw with the DAO, that is extremely difficult to do when you're trying to program a complex distributed application.

Now, the other thing, too, is that, frankly, I don't really care how many developers you have. I really care about the quality of your developers. If you look at WhatsApp, WhatsApp sold to Facebook for billions of dollars. They had a couple dozen developers. So, IBM has thousands of developers. They're shit developers. Sorry if you work at IBM. Get a new job.

But the quantity gets eclipsed by the quality. And here's why. Like, it's counterintuitive, but here's why. Software is about scaling. you write one piece of code and you run it a billion times so that's why having quality developers it's just it's incomparable to having a a huge quantity of shit developers yeah and so we get into the quality over quantity yeah debate which i agree with again this whole space is a meritocracy and that's again i got a lot of friends that are

in the ethereum they think it's the next thing they think they're going to be using the world computer soon but don't get caught up in the marketing it's all marketing and if you and you said the dow is the only example the dow is not the only example a parody wallet got hacked three months ago two months ago and the parody wallet which is written solidity it was founded by gavin wood who wrote solidity like he created this literally the solidity coding language he couldn't even write a smart contract that was secure his company couldn't like if the dude that created the language that you're running your system on can't create a bug-free hack-free smart contract you might not want to be buying ethereum yeah there's a thing too in software

development they're like don't don't write code that is at your level of competence because then you won't be able to debug it because debugging it requires 2x your competent the the complexity of the code so you got to write code that is half of what you are able to write that way you can debug it at your level of competence. That's an important heuristic in software development. The other thing I wanted to add is that we're talking about currencies. We're not just talking about technologies. We talk about technologies a lot, but these are currencies. The quality of the investors that you're attracting, in my mind, is almost as important as the quality of the developers that you are attracting. If you are attracting dumb money, you're going

to have dumb investors who are not going to stick around when things get tough. But if you're attracting smart money and intelligent investors who understand how to ride cycles and how to wait things out and understand bear markets, they get that they might buy at 1200 two years ago and it's at 6000 today and they'll just average it out yeah and you're finding a a quick lesson in dumb money and the people that went with roger ver and b cash um that's been a quick slap in the face got your ass burnt who knows hey yeah nothing settled yeah hey bitcoin cash might make a huge comeback we might be uh eating crow uh something tells me that's not gonna be the case i don't think so not with their eda their their difficulty adjustment they

they said they're they're working on fixing it they're gonna oh they're gonna do another hard fork but they've already created hyper we're gonna have bitcoin cash cash uh bitcoin cash 2x so how do we so let's bring it back here let's bring a full circle how do we articulate this to our listeners where are we right now how have your thoughts changed initially from when you first got into bitcoin to where we are now and how do you see them evolving going forward and we're going to stop there for today this is the end of part two episode two tales from the crypt hope you guys enjoyed the last hour of our conversation with pierre again we hit on a bunch of topics interesting things speculative attacks bitcoin versus ethereum

quality over quantity the ico frenzy this year we'll be back next week with part three the final part of our three-part conversation with pierre again like i said in the beginning of the episode the conversation is only getting more interesting in my mind as as we get further into it next week in part three we'll talk about uh we'll talk about cold storage how to do some bitcoin cold storage and uh talk about some techniques that that you freaks can use to uh to get your bitcoin off the exchange and into your possession because again that's the uh the most important part of this experiment is taking back your individual sovereignty and controlling your own wealth so again hope you guys uh enjoyed the conversation if so please subscribe follow me on twitter

share share the podcast with your family your friends random people on the street i don't care who let's just spread the word um and i will see you freaks next week enjoy the weekend